US Taxpayers Forced to Bail Out Corrupt Detroit - $300 Million

[JBond]

Nearly $300 million in aid for Detroit from federal and state coffers, will be announced Friday as Obama administration officials visit the city to discuss what can be done to help eradicate blight, improve transportation, encourage new business and make residents safer.

The funding will include $150 million in blight eradication and community redevelopment, including $65 million in Community Development Block Grant funding — which had already been awarded over two years but could not be accessed by the city. An additional $25 million could help hire as many as 150 firefighters in the city.

Some $24 million in federal resources that had been tied up will go to repairing buses and installing security cameras, part of an overall

$140-million investment in transit systems.

Gene Sperling, the head of President Barack Obama’s National Economic Council and an Ann Arbor native, briefed reporters on some the plans Thursday evening, saying Friday’s meeting at Wayne State University is “the first of many efforts that the administration will engage in with the city of Detroit.”

Many details were still to come out Friday.

“We’ve found significant resources that we believe can be unlocked and expedited and leveraged to have significant impact on the economy of Detroit,” Sperling said.

Gov. Rick Snyder, Detroit Mayor Dave Bing and emergency manager Kevyn Orr — who on Detroit’s behalf filed the largest municipal bankruptcy in history in July — will be part of the talks with Sperling, Housing and Urban Development Secretary Shaun Donovan, Transportation Secretary Anthony Foxx and Attorney General Eric Holder.

Representatives of local foundations and business leaders were expected to be present as well. Members of Michigan’s congressional delegation were expected to attend if they could break away from votes with a federal shutdown looming at midnight Monday without a funding resolution.

“If we’re not there we’ll teleconference,” said U.S. Sen. Debbie Stabenow, D-Mich. “I think what is really important is there is an ongoing commitment from the administration.”

Sperling wasn’t immediately able to break down just how much of the $300 million represents new funding and how much had already been awarded to Detroit but, for whatever reason, hadn’t reached the city before. But he said much of it represented an effort by adminisitration officials to scour their departments for funding that Detroit could access.

For instance, in the case of $25 million to be used for firefighters, the funding, Sperling said, had “been accumulating for years” but could not be accessed. The $65 million in CDBG funding includes $33 million that had been withheld from the last fiscal year because the city did not meet required obligations to access it.

In recent weeks and months, local leaders — from former Detroit Mayor Dennis Archer to UAW President Bob King — had visited the White House to talk about what could be done for Detroit, with a federal bailout out of the question.

Sperling said all of the parties have been working to find ways not only to make funds more flexible so they can be used where most needed, such as for demolition, but to figure out ways to ensure that the city has the proper planning and accounting systems to get the funding out to needed projects.

In the months to come, for instance, the White House’s chief technology officer is expected to lead a team of experts to Detroit to make recommendations on how to improve city systems, Sperling said.

“Detroit historically had some major problems deploying grants and other resources, and so there could be a fair amount sort of stuck in the pipeline,” said Snyder, who was in Washington on Thursday. “Financial systems, accounting systems for the city of Detroit? They are a disaster.”

Contact Todd Spangler: 703-854-8947 or tspangler@freepress.com

http://www.freep.com/article/201309...use-bankruptcy-aid-for-detroit-blight-removal

 

[Jon88]

How about we stop encouraging those useless people to have 5 kids each?

That's what I would do.

 

[JBond]

Detroit is a liberal utopia. It is an example of what happens when liberal utopian ideas are applied and carried through regardless of the financial ramifications. The combination of greedy unions and corrupt government officials has resulted in a predictable disaster. Liberal leadership at it's finest.

 

[Jon88]

I say we send in the national guard and clean that town up. What a joke.

Looks like Somalia.

 

[Midswat]

It pisses me off that tax dollars are being spent to fix America.

Grrrr.

 

[Jon88]

To fix that shithole, yeah.

 

[JBond]

It pisses me off that tax dollars are being spent to fix America.

Grrrr.

You believe it will fix the issues? Really? You believe pouring money into a corrupt broken system will help? Odd.

 

[Jon88]

If it weren't for us they'd all starve. We're subsidizing the destruction of that city.

 

[JBond]

How Detroit went broke

Detroit is broke, but it didn’t have to be. An in-depth Free Press analysis of the city’s financial history back to the 1950s shows that its elected officials and others charged with managing its finances repeatedly failed — or refused — to make the tough economic and political decisions that might have saved the city from financial ruin.

Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroit’s leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits — saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.

The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroit’s economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayor’s sometimes fiery rhetoric may have contributed to metro Detroit’s racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them.

And Wall Street types who applauded Mayor Kwame Kilpatrick’s financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the city’s finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.

The State of Michigan also bears some blame. Lansing politicians reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.

Decades of mismanagement added to Detroit’s fiscal woes. The city notoriously bungled multiple federal aid programs and overpaid outrageously to incentivize projects such as the Chrysler Jefferson North plant. Bureaucracy bogged down even the simplest deals and contracts. In a city that needed urgency, major city functions often seemed rudderless.

When all the numbers are crunched, one fact is crystal clear: Yes, a disaster was looming for Detroit. But there were ample opportunities when decisive action by city leaders might have fended off bankruptcy.

If Mayors Jerome Cavanagh and Roman Gribbs had cut the workforce in the 1960s and early 1970s as the population and property values dropped. If Mayor Dennis Archer hadn’t added more than 1,100 employees in the 1990s when the city was flush but still losing population. If Kilpatrick had shown more fiscal discipline and not launched a borrowing spree to cover operating expenses that continued into Mayor Dave Bing’s tenure. Over five decades, there were many ‘if only’ moments.

“Detroit got into a trap of doing a lot of borrowing for cash flow purposes and then trying to figure out how to push costs (out) as much as possible,” said Bettie Buss, a former city budget staffer who spent years analyzing city finances for the nonpartisan Citizens Research Council of Michigan. “That was the whole culture — how do we get what we want and not pay for it until tomorrow and tomorrow and tomorrow?”

Ultimately, Detroit ended up with $18 billion to $20 billion in debt and unfunded pension and health care liabilities. Gov. Rick Snyder appointed bankruptcy attorney Kevyn Orr as the city’s emergency manager, and Orr filed for Chapter 9 on July 18.

For this report, the Free Press examined about 10,000 pages of documents gathering dust in the public library’s archives. Since most of those documents have never been digitized, the Free Press created its own database of 50 years of Detroit’s financial history. Reporters also conducted dozens of interviews with participants from the last six mayoral administrations as well as city bureaucrats and outside experts. Among the highlights from the review:


■ Taxing higher and higher: City leaders tried repeatedly to reverse sliding revenue through new taxes. Despite a new income tax in 1962, a new utility tax in 1971 and a new casino revenue tax in 1999 — not to mention several tax increases along the way — revenue in today’s dollars fell 40% from 1962 to 2012. Higher taxes helped drive residents to the suburbs and drove away business. Today, Detroit still doesn’t take in as much tax revenue as it did just from property taxes in 1963.

■ Reconsidering Coleman Young: Serving from 1974-1994, Young was the most austere Detroit mayor since World War II, reducing the workforce, department budgets and debt during a particularly nasty national recession in the early 1980s. Young was the only Detroit mayor since 1950 to preside over a city with more income than debt, although he relied heavily on tax increases to pay for services.

■ Downsizing — too little, too late: The total assessed value of Detroit property — a good gauge of the city’s tax base and its ability to pay bills — fell a staggering 77% over the past 50 years in today’s dollars. But through 2004, the city cut only 28% of its workers, even though the money to pay them was drying up. Not until the last decade did Detroit, in desperation, cut half its workforce. The city also failed to take advantage of efficiencies, such as new technology, that enabled enormous productivity gains in the broader economy.

■ Skyrocketing employee benefits: City leaders allowed legacy costs — the tab for retiree pensions and health care — to spiral out of control even as the State of Michigan and private industry were pushing workers into less costly plans. That placed major stress on the budget and diverted money from services such as streetlights and public safety. Detroit’s spending on retiree health care soared 46% from 2000 to 2012, even as its general fund revenue fell 20%.

■ Gifting a billion in bonuses: Pension officials handed out about $1 billion in bonuses from the city’s two pension funds to retirees and active city workers from 1985 to 2008. That money — mostly in the form of so-called 13th checks — could have shored up the funds and possibly prevented the city from filing for bankruptcy. If that money had been saved, it would have been worth more than $1.9 billion today to the city and pension funds, by one expert’s estimate.

■ Missing chance after chance: Contrary to myth, the city has not been in free fall since the 1960s. There have been periods of economic growth and hope, such as in the 1990s when the population decline slowed, income-tax revenue increased and city leaders balanced the budget. But leaders failed to take advantage of those moments of calm to reform city government, reduce expenses and protect the city and its residents from another downturn.

■ Borrowing more and more: Detroit went on a binge starting around 2000 to close budget holes and to build infrastructure, more than doubling debt to $8 billion by 2012. Under Archer, Detroit sold water and sewer bonds. Kilpatrick, who took office in 2002, used borrowing as his stock answer to budget issues, and Bing borrowed more than $250 million.

■ Adding the last straw — Kilpatrick’s gamble: He’s best known around the globe for a sex and perjury scandal that sent him to jail and massive corruption that threatens to send him to prison next month for more than 20 years. The corruption cases further eroded Detroit’s image and distracted the city from its fiscal storm. But perhaps the greatest damage Kilpatrick did to the city’s long-term stability was with Wall Street’s help when he borrowed $1.44 billion in a flashy high-finance deal to restructure pension fund debt. That deal, which could cost $2.8 billion over the next 22 years, now represents nearly one-fifth of the city’s debt.

With all the lost opportunities over decades, with Detroit’s debt mounting, with the housing crash and Great Recession just over the horizon, 2005 turned out to be the watershed year.

Although no one could see it at the time, Detroit’s insolvency was guaranteed.

http://www.freep.com/interactive/ar...-Bankruptcy-history-1950-debt-pension-revenue

 

[ThoughtExperiment]

That chart looks a lot like the US government's.

Of course Detroit can't print its own money.

 

[Jon88]

Let's just level the place and start over.

That B52 is from Barksdale Air Force Base in my town, by the way. I'd be glad to pull some strings and send it over.