Detroit is Weeks Away From Running Out of Cash

[jobeterob]

City of Detroit is financially 'insolvent'
By Chris Isidore @CNNMoney May 13, 2013: 12:51 PM ET

One of an estimated 78,000 vacant buildings in Detroit. Years of financial decline have left the city government insolvent, according to a report released Monday.

NEW YORK [[CNNMoney)

The Detroit city government is weeks away from running out of the cash it needs to operate, according to an initial report from the emergency manager overseeing its finances.

The report from Kevyn Orr, the bankruptcy attorney appointed by the state in March, lays out a bleak financial position for the city.





"The city has effectively exhausted its ability to borrow," he writes in the report, adding that the city "is clearly insolvent." To avoid running out of cash before the end of its fiscal year on June 30, it must "defer payments on its current obligations," including more than $100 million in pension payments that are due.

"No one should underestimate the severity of the financial crisis," Orr said in a statement. "The path Detroit has followed for more than 40 years is unsustainable and only a complete restructuring of the city's finances and operations will allow Detroit to regain its footing."

Related: Detroit, in financial trouble, gets emergency manager

He said this report was a baseline from which to develop that restructuring plan. It does not use the term "bankruptcy," but Orr hasn't ruled that out.

Detroit is struggling under at least $15 billion in debt, due to years of borrowing to pay its bills as tax revenues plummeted. The population of the city has fallen by nearly 30% since 2012, and there are currently over 100,000 vacant lots and buildings. Together, this has meant a drastic drop in revenue from both income and property taxes.



Detroit is struggling to come up with annual debt payments of about $246 million, which eat up almost 20% of the its general fund budget. Orr says the city needs relief from the money it owes, suggesting that investors holding its debt could end up taking haircuts.

Related: 11 cities where workers are disappearing

But investors won't be the only ones hit by Orr's efforts to restructure the city's finances. He is considering changes in healthcare coverage for government employees and retirees, as well as in its pension plans. He's also looking at further changes in pay rates and staffing, on top of the layoffs and 10% pay cut that have already been implemented.

The city's unemployment rate has fallen in recent years with a rebound in the auto industry, but at 18.3% it is still nearly triple where it stood at in 2000 and more than double the national rate. To top of page

[roger]

I suspect that the statement that "The population of the city has fallen by nearly 30% since 2012" is a misprint .. not even the civil war in Syria has led to such an exodus.

I wonder how it was supposed to have read.

Roger

[kenneth]

This graph only goes through 2010 but shows Detroit's population decline of the last century.

http://online.wsj.com/article/SB10001424052748704461304576216850733151470.html#p roject%3Ddetroit0311%26articleTabs%3Dinteractive

Wikipedia, too, only goes through 2010. That appears to be the latest census figures.

Population of Detroit

Historical populations


Census
City[139] [[http://en.wikipedia.org/wiki/Detroit#cite_note-139)
Metro[140] [[http://en.wikipedia.org/wiki/Detroit#cite_note-140)
Region[141] [[http://en.wikipedia.org/wiki/Detroit#cite_note-141)


1810 [[http://en.wikipedia.org/wiki/United_States_Census,_1810)
1,650
N/A
N/A


1820 [[http://en.wikipedia.org/wiki/United_States_Census,_1820)
1,422
N/A
N/A


1830 [[http://en.wikipedia.org/wiki/United_States_Census,_1830)
2,222
N/A
N/A


1840 [[http://en.wikipedia.org/wiki/United_States_Census,_1840)
9,102
N/A
N/A


1850 [[http://en.wikipedia.org/wiki/United_States_Census,_1850)
21,019
N/A
N/A


1860 [[http://en.wikipedia.org/wiki/United_States_Census,_1860)
45,619
N/A
N/A


1870 [[http://en.wikipedia.org/wiki/United_States_Census,_1870)
79,577
N/A
N/A


1880 [[http://en.wikipedia.org/wiki/United_States_Census,_1880)
116,340
N/A
N/A


1890 [[http://en.wikipedia.org/wiki/United_States_Census,_1890)
205,877
N/A
N/A


1900 [[http://en.wikipedia.org/wiki/United_States_Census,_1900)
285,704
542,452
664,771


1910 [[http://en.wikipedia.org/wiki/United_States_Census,_1910)
465,766
725,064
867,250


1920 [[http://en.wikipedia.org/wiki/United_States_Census,_1920)
993,678
1,426,704
1,639,006


1930 [[http://en.wikipedia.org/wiki/United_States_Census,_1930)
1,568,662
2,325,739
2,655,395


1940 [[http://en.wikipedia.org/wiki/United_States_Census,_1940)
1,623,452
2,544,287
2,911,681


1950 [[http://en.wikipedia.org/wiki/United_States_Census,_1950)
1,849,568
3,219,256
3,700,490


1960 [[http://en.wikipedia.org/wiki/United_States_Census,_1960)
1,670,144
4,012,607
4,660,480


1970 [[http://en.wikipedia.org/wiki/United_States_Census,_1970)
1,514,063
4,490,902
5,289,766


1980 [[http://en.wikipedia.org/wiki/United_States_Census,_1980)
1,203,368
4,387,783
5,203,269


1990 [[http://en.wikipedia.org/wiki/United_States_Census,_1990)
1,027,974
4,266,654
5,095,695


2000 [[http://en.wikipedia.org/wiki/United_States_Census,_2000)
951,270
4,441,551
5,357,538


2010 [[http://en.wikipedia.org/wiki/2010_United_States_Census)
713,777
4,296,250
5,218,852


*Estimates [4] [[http://en.wikipedia.org/wiki/Detroit#cite_note-CensusCity-4)[5] [[http://en.wikipedia.org/wiki/Detroit#cite_note-CensusCSA-5)
Metro: Metropolitan Statistical Area [[MSA)
Region: Combined Statistical Area [[CSA)


At its peak in 1950, the city was the fifth-largest in the United States. Its population has since declined dramatically, dropping more than 60 percent in 60 years, from 1,849,568 in 1950 to 713,777 in 2010.[42] [[http://en.wikipedia.org/wiki/Detroit#cite_note-NYT_Census-42)
The population collapse has resulted in large numbers of abandoned homes and commercial buildings, and areas of the city hit hard by urban decay [[http://en.wikipedia.org/wiki/Urban_decay).[44] [[http://en.wikipedia.org/wiki/Detroit#cite_note-detroitparcelsurvey-44)[45] [[http://en.wikipedia.org/wiki/Detroit#cite_note-news.nationalpost-45)[46] [[http://en.wikipedia.org/wiki/Detroit#cite_note-nytimes-46)[47] [[http://en.wikipedia.org/wiki/Detroit#cite_note-wired-47)[48] [[http://en.wikipedia.org/wiki/Detroit#cite_note-couriermail-48)
In 2010, the city had 713,777 residents.[4] [[http://en.wikipedia.org/wiki/Detroit#cite_note-CensusCity-4) These were represented by 269,445 households, and 162,924 families residing in the city. The population density was 5,144.3 people per square mile [[1,986.2/km²). There were 349,170 housing units at an average density of 2,516.5 units per square mile [[971.6/km²).
Of the 269,445 households, 34.4% had children under the age of 18 living with them, 21.5% were married couples living together, 31.4% had a female householder with no husband present, 39.5% were non-families, 34.0% were made up of individuals, and 3.9% had someone living alone who is 65 years of age or older. Average household size was 2.59, and average family size was 3.36.
There is a wide distribution of age in the city, with 31.1% under the age of 18, 9.7% from 18 to 24, 29.5% from 25 to 44, 19.3% from 45 to 64, and 10.4% 65 years of age or older. The median age was 31 years. For every 100 females there were 89.1 males. For every 100 females age 18 and over, there were 83.5 males.

[midnightman]

Too much corruption has harmed a great city... hope it gets the help it deserves and starts anew. Maybe bankruptcy is what Detroit proper needs at this point. It's unfortunate but I guess you gotta do what you gotta do. Some parts of the city looks like a ghost town...

[midnightman]

I suspect that the statement that "The population of the city has fallen by nearly 30% since 2012" is a misprint .. not even the civil war in Syria has led to such an exodus.

I wonder how it was supposed to have read.

Roger

I have a problem with that too... I'm sure Detroit's population hasn't dropped that drastically. Yeah it's dropped but not that fast.

[JL2648]

If one really wants to get immersed in the stats and trends, see:

http://drawingdetroit.wordpress.com/2013/04/08/detroits-unemployment/

This same site notes "Since 2010 Detroit's population has appeared to be steadying, only experiencing a slight decline."

Jeff

[midnightman]

If one really wants to get immersed in the stats and trends, see:

http://drawingdetroit.wordpress.com/2013/04/08/detroits-unemployment/

This same site notes "Since 2010 Detroit's population has appeared to be steadying, only experiencing a slight decline."

Jeff

Thanks Jeff. Interesting.

[smark21]

Detroit Mayor Dave Bing has just announced he’s not running for another term and expressed great frustration with both Michigan Governor Snyder whom Bing accuses of not being a team player, and the City Council whom he labels unwilling to make any changes on how the city does business in order to rescue the City.

[midnightman]

^ I don't think anyone can argue that Bing is right. The city council and Snyder needs to stop pointing fingers and actually help each other. Or they could just all leave Detroit and let Detroit folks build the city back up their doggone selves.

[calvin]

From today's Detroit Free Press:

Detroit's pension boards pay $22K to send 4 trustees to Hawaii

Four trustees of Detroit’s two public pension funds are heading to a Hawaiian beach resort this weekend with their $22,000 tab paid for by the funds, which are mired in claims of mismanagement and said to be at least $600 million underfunded.

Records obtained by the Free Press under the Freedom of Information Act show the expenses cover airfare — including a first-class flight for one trustee — lodging at the Hilton Hawaiian Village Waikiki Beach Resort in Honolulu, registration fees, meals and a per diem for miscellaneous expenses.

The city’s two public pension funds — the General Retirement System and the Police and Fire Retirement System — each are sending two trustees to the six-day National Conference on Public Employee Retirement Systems [[NCPERS) conference, which starts Saturday. The retirement systems, which are funded by contributions from workers and the city, have combined assets valued at more than $5 billion and provide benefits to about 20,000 retirees and beneficiaries.

Stanford University professor Joe Nation, who specializes in public employee pensions, criticized the trip.

“Trustees don’t need to go to Waikiki to learn about best practices,” he told the Free Press. “Everyone knows they go there and they don’t work very hard. That’s just the nature of it.”

“That just happens to be where the conference is this year,” said General Retirement System Trustee John Riehl, who will be attending. “We have to stay on top. We have to know what we’re doing.”