Detroit Goes Under

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CitigroupDetroit will go under, probably in a matter of weeks. In this case, the end can be defined as the appointment of an emergency financial manager by Michigan Governor Rick Snyder. Snyder gets a report today from a review team of financial experts asked to access the city's finances. Enough of the report has been leaked so that the conclusion is inevitable. One of the largest and most storied cities in America has collapsed, both in terms of its financial state and infrastructure.

The Detroit Free Press reports that:

What's more crucial is the review team's conclusion on whether city
leaders can reverse course on their own. Two people familiar with the report told the Free Press last week that the review team concluded that Detroit's debts are too insurmountable, and the roadblocks to restructuring city government too great for Mayor Dave Bing and the council to handle on their own.

The Detroit News adds:

"Whether it's an emergency manager or Chapter 9 (bankruptcy) or both, that's got to be the strategy here," said Eric Scorsone, a Michigan State University professor and expert on the state's emergency manager law. "It's going to come down to ... which option is more robust and really does fix the problem."

Detroit has long-term municipal debt and pension and health commitments that are more than $12 billion. Detroit's accumulated deficit this year is in excess of $325 million.

The emergency financial manager will set about the repugnant job of closing parks, police and fire stations; trying to void contracts; and, in general, restructuring any financial relationship that gives benefit to the city. The process is a familiar one in Michigan, as cities such as Flint and Pontiac have been through similar repairs. The actions in every case will be insufficient, as far as the very long term is concerned. As people continue to stream out of these cities, the number of cuts will reach the level at which there is nothing left that can be reasonably eliminated.

Detroit has been dead for years. Now, it is a about to get the coroner's certificate.


Filed under: 24/7 Wall St. Wire, Politics Tagged: featured
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