Should Detroit be bailed out?

[GiaGiovanni]

Just a yes/no question.

And are there any other options?

[Gidney N Cloyd]

1. Define "bail out."

[GiaGiovanni]

2. Good question.

I'm thinking of paying off enough of its debts to make it viable. I don't know how much that would be.

[Bunnahabhain]

9. What do you mean by "make it viable?"

I would tend to think it means to make it a going concern. "Going concern" is an accounting term that can be a little involved but it basically conveys the concept an organization will be able to continue operating on an indefinite basis. So based on what is available knowledge in the media, do you think if Detroit suddenly has all the billions in unsecured debt it owes paid off (what you propose), it would be able to continue operating as a functioning municipality? Do you think even if it owed $0.00 that it could take in enough revenue to meet its ongoing expenses?

[GiaGiovanni]

11. I'm guessing the answer is "no" unless they hike taxes to all time highs

That's why I wondered what kind of solutions were actually out there.

[Bunnahabhain]

15. Taxes on who?

I mean around half of the home owners there do not even bother paying their property taxes. The majority of families in Detroit receive one or more types of government assistance. Detroit needs business...business does not need Detroit, i.e. they'll leave.

[GiaGiovanni]

17. OK. What is a good solution to this?

Close down the city?

[Bunnahabhain]

26. No one wants a "good" solution

Except for those nasty business people and Republicans. Detroit's expense structure is untenable and needs to be drastically changed. The corporate culture in Detroit's public servants is horrendous and needs to be changed. Detroit's attitude towards the suburbs is horrible and has to be changed.

Did you know a number of benefactors donated millions in EMS and police cars to the city but feel the city mechanics will not keep them up so started a non-profit to own the vehicles and do the maintenance. Detroit is badly broken and needs to really change on a fundamental basis.

[GiaGiovanni]

28. So the vehicles are owned and fixed by a private concern?

Is that the kind of solution that works outside of small, specific things?

[Bunnahabhain]

30. My example was not a solution

but rather an example of how bad the problem is. I mean, WTF? Not trusting city mechanics to properly keep up police squad cars and EMS? How bad is it when benefactors think like this?

[GiaGiovanni]

32. So what do you feel the solution is?

Why did the group not trust the city mechanics, btw?

[Bunnahabhain]

35. Parts of the solution were given in post #26

And the group did not trust the mechanics because they live in and around Detroit and have seen their work. Just like I did for many years.

[GiaGiovanni]

38. This was post 26

"Except for those nasty business people and Republicans. Detroit's expense structure is untenable and needs to be drastically changed. The corporate culture in Detroit's public servants is horrendous and needs to be changed. Detroit's attitude towards the suburbs is horrible and has to be changed.

Did you know a number of benefactors donated millions in EMS and police cars to the city but feel the city mechanics will not keep them up so started a non-profit to own the vehicles and do the maintenance. Detroit is badly broken and needs to really change on a fundamental basis."

It's a bit cryptic. You're talking about a change in political attitude, but I don't see how that could actually help Detroit in crisis.

[Bunnahabhain]

41. You need to read better.

Where did I say a "change in political attitude?" Where did I even imply that? I pretty clearly stated what I feel needs to be changed but that those things are often tied to being "Republican." I just do not think putting one's house in fiscal order is a political thing; it's a common sense thing, and in the case of Detroit, a reality thing.

[GiaGiovanni]

42. You need to make yourself clearer and not leave so much between the lines

How about you make a list of those things you think will help.

[Bunnahabhain]

44. Dammit son

Did you miss the lists in post #26 and #40? I'm not here to spoon feed you or repeat myself.

[rug]

3. Yes. Unless you agree with this:

[GiaGiovanni]

4. Was that New York?

?

[rug]

7. Yea, late 70s.

Look at it now.

[GiaGiovanni]

8. I don't remember the ins and outs of that

I thought it was saved by "A Chorus Line".

Seriously, what was the deal there?

[rug]

12. Very similar to Detroit.

Huge budget shortfall. Right wing hue and cry from the right wing blaming the unions. State Emergency Financial Control Board. Subsequent massive cuts to social services and the City University. Lots of concessions to real estate interests.

Here's a good article on it.

http://www.thenation.com/article/173873/legacy-1970s-fiscal-crisis#axzz2arB1PE8Q

[GiaGiovanni]

14. Thanks for the link!

I've got my weekend reading.

[mick063]

5. Detroit needs our help

And the pensions for city employees must be fully funded as well.

We cannot let the financial moguls continue to strip public assets.

I propose annexing the Cayman Islands and bringing Detroit's money back where it belongs.

In Detroit.

[GiaGiovanni]

6. So, the plan is to let it go bankrupt and have (foreign) investors buy it

for pennies on the dollar?

[mick063]

16. No.

The plan is to take the money being used to build the NSA data collection center in Utah, and save Detroit instead.

The plan is to impose tariffs on nations that pollute the earth and kill their workers, to not only rebuild Detroit, but create a competitive environment where factories can be built once again.

The plan is to stop the public funding of professional sport venues and fund road repair in Detroit instead.

The plan is for the Federal government to invest in rebuilding Detroit, creating jobs which will stimulate the local economy and fill the coffers of local government through a new found tax base.

[GiaGiovanni]

20. That sounds more like a political platform than a plan

What is actually possible?

[mick063]

23. Oh it is possible alright

32 trillion of "trickle down" hidden off shore.


It can be done.

[GiaGiovanni]

34. 32 trillion is not coming back if it's offshore

We'd have to have a UN intervention for that, I think.

[mick063]

46. Detroit thrived for years

What made it stop?

Whatever that is, stop doing it.

No more globalization to lure business away.

No more "right to work" states to "lure" business away.

No more subsidizing and tax breaks to "lure" business away.

Such things must be done at the federal level.

Unfettered capitalism killed Detroit, just like it is killing America.

There will be a rash of cities going bankrupt, one after another, before the carnage is done.

All the while, the money trickling out, instead of down.

[GiaGiovanni]

47. That would mean reversing the last 40 years.

Not that I disagree with you in principle; I don't. But the GATT and GATS treaties will prevent any of that from happening.

[hack89]

48. They lost 60% of their population for starters

their tax base has been decimated while they have not made corresponding cuts to infrastructure and services.

[Bunnahabhain]

49. Exactly!

And why did these reasonable actions not take place? Moral hazard and a "strong" mayoral model in Detroit embodied by the cult of Coleman Young and then trumped by Kwarme's reign. This is not the summation of Detroit's problems but moral hazard, leading to egregious and sweetheart public service contracts, is a material portion of the problem.

[GiaGiovanni]

52. At this point, these measures are not enough it seems

It's a real issue as to what to do. That's why I am wondering how anyone would solve the mess, other than razing the city.

The issues:

1. The debt to creditors
2. The pensions, which people were promised and did earn
3. The lack of any tax generation potential
4. The lack of business activity in the area
5. An impoverished population
6. An unabated crime problem
7. City services in disarray, including a bad public education system


Did I miss anything?

[Scuba]

37. Bingo.

[erpowers]

10. Yes

Yes, Detroit should be bailed out because it is a U.S. city and the government spent far more to bail out Wall Street.

[GiaGiovanni]

13. Good point

Hadn't thought about the Wall Street bailout as a bailout. To me that was just theft.

[Octafish]

18. Yes.

If not, there are a whole bunch of people who are in for a big surprise in the not too distant future.

[GiaGiovanni]

24. Who would be in for a surprise?

Do you see other cities going this route?

[Octafish]

57. ''Vulture'' Capitalists Strike Vulnerable Cities and Counties

Vulture capitalists—investors who profit off of financially distressed companies by stripping assets, laying off workers, and loading up debt—killed the Hostess Twinkie last summer to make a buck, and they may soon be trying to kill local government services around the country for the same reason.

 

Flush with cash as the stock market soars to record highs, yet with few investment opportunities to their liking in the still-hurting private sector, vulture capitalists circling high in the financial sky believe they have spied their next set of targets: fiscally struggling cities and counties like Detroit, Michigan; Stockton, California; San Bernardino, California; and Jefferson County, Alabama, where Birmingham is located.

 

It has already begun in Birmingham, where several hedge funds—including Monarch Alternative Capital, which was a major player in the Hostess bankruptcy and Stone Lion Capital, which was involved in the bankruptcy of Eastman Kodak—have bought more than $600 million of Jefferson County debt. Under pressure after filing the most expensive municipal bankruptcy ever in the US in November 2011, Jefferson County has since cut expenses and laid off more than 700 county workers.

 

Detroit, with $8.6 billion in long-term debt, is the big target, but Republican Gov. Rick Snyder appointed financial czar Kevyn Orr barely two months ago, so the going is still early. Earlier this year, however, the sale of a $25 million block of Detroit pension certificates at about 66 cents on the dollar suggested hedge fund involvement, according to Matt Fabian of the Municipal Market Advisors research firm.

 

Confirming that interest is running high, Alan Mintz, the founder of Stone Lion Capital, said that “Detroit is something we as well as other funds have looked at,” while Marti Kopacz of Brant Point Advisors gushed that “Everyone is looking for ways into Detroit. It's new and unique.”

 

How do these vulture capitalists expect to make money on these investments, especially in light of the political constraints involved in local government and the need to provide basic services like police, firefighting and trash collection? Several strategies suggest themselves, including cutting local budgets, selling off assets, lending, and municipal bonds. The question will then turn on how far local government services can be cut.

CONTINUED...

http://www.allgov.com/news/where-is-the-money-going/vulture-capitalists-strike-vulnerable-cities-and-counties-130513?news=850003

These turds want to pay pennies on the dollar for everything We the People paid top dollar to develop. Americans who think it won't happen to their communities are in fot a shock.

[GiaGiovanni]

60. We're dealing with out-of-control criminality

all legally sanctioned.

[Bunnahabhain]

19. What does "bail out" mean?

We could waive a magic wand and erase every single dollar of the billions Detroit owes in unsecured debts and it would still run in the red. It will also be paying a hefty premium for debt instruments after this fiasco, i.e. its ability to borrow will be severely limited and costly. It will still be like a war zone in many areas. It will still be a PR disaster. It will still have no tax base.

I know no one is going to like reading this but it's the truth.

[GiaGiovanni]

22. So how does one make Detroit viable?

If what you say is true.

[Bunnahabhain]

27. See my above reply to you.

[GiaGiovanni]

29. I saw them and I responded

I am not so sure your ideas will work outside a few small concerns.

[Bunnahabhain]

31. You did not understand my example.

[GiaGiovanni]

33. I guess not

Can you explain it in a broader context?

[Bunnahabhain]

36. Ummm

I think sometimes folks need to work through problems on their own. If what I've given you is not enough to work through some of the problems more would not help either.

[GiaGiovanni]

39. No, you just don't want to directly express your opinion openly

This nonsense about "working it out on your own" is just a smokescreen.

Have the guts to say what you mean.

[Bunnahabhain]

40. You're laughable

Go read post #26. My opinion was stated very succinctly. You're way into yourself if you think it takes "guts" to say something on a stupid webboard. If you're unable to understand what I said, or do not think it reflects reality, that's a you problem, not a me problem.

Detroit has a plethora of problems but they will not all be solved simply by paying off its debt. I spent some of my best years in and around that city but it is fundamentally broken at this point and only change can save it. It needs infrastructure, a new expense model, jobs, a change in the attitude of those running and working for the city.

So because I do not accept the status quo is this the part where you call me names?

[GiaGiovanni]

43. When you need call names, it means you're done

You have nothing more to add.

[Bunnahabhain]

45. Yes, obviously, I have nothing of value to add

Again, if you are unable to understand what I'm saying that's a you problem, not a me problem.

And you were the one that started with getting childish accusing me of lacking the "guts" to say something? Bawaha.

[KamaAina]

21. Borowitz suggested that Detroit should just declare itself to be a bank

then just sit back and watch the bailout money roll in.

[GiaGiovanni]

25. That's pretty funny.

[kwassa]

50. Detroit can't be bailed out.

All the money in the world can't bail Detroit out, because there is no viable economy in Detroit.

When all the major employers go bankrupt or leave the city, the jobs leave, too, and they don't come back.

64% of the citizens have left, too.

[GiaGiovanni]

51. So what is to be done?

Does the city just wait for everyone to abandon it?

[KharmaTrain]

53. Unless There's Some Kind Of Economic Base...

...this city will continue to decay. Detroit is not alone...right up the road is Flint that's been in total decline or Gary, Indiana...a once mighty steel town that is now used to film "life the day after" productions. The three cities have something in common...they were single industry towns and the industries no longer exist. A combination of technology and globalization means Ford no longer needs as many people to make their cars and no matter of government bailout is going to create jobs that aren't needed.

I'm in Chicago and have watched the ongoing decline of what were once vibrant working class neighborhoods where their major factory/employers moved on and the areas have never recovered. The difference is Chicago had other industries that enabled the city to weather the loss of its factories but many blighted areas still exist and decades of all sorts of government assistance hasn't helped. Some areas have come back to life due to "gentrification"...predominately young and white, who've moved back into some city neighborhoods but that's the exception, not the rule. Without some kind of return to an industrial base or developing some kind of industry that employs the same numbers of people the Big 3 once did, the city's problems will continue...and so will the need for federal assistance...

[curlyred]

54. Yes. If we can send a bazillion dollars to 'fill in the blank' we can bail Detroit out

[JaneyVee]

55. YES.

[taught_me_patience]

56. By who? State of Michigan... possibly. Federal government... hell no.

I say possibly because it's really up to the folks in the state of Michigan to decide.

[Union Scribe]

59. No, it isn't. The GOP running the show here

don't give two flying figs about the voters or what they say. Voters rejected the emergency manager law that allowed the governor's puppet to declare Detroit bankrupt, but they pushed it through anyway. I mean we literally voted on a measure that said, "no there should be no emergency managers" and they went ahead and made a new law that said "yes there will be."

The Federal government now needs to get off its ass and protect both democracy and the workers getting bowled over in this city and state.

[WinkyDink]

58. Yes.

[GlashFordan]

61. No.

I have a better idea.

In 1945, Berlin was a city of millions that literally laid in rubble. So, after the war they basically knocked down buildings, carted away debris and built a mountain.

So level Detroit, build mountains and let nature take over. Put the people of Detroit to work with the project, assume pensions, set up generous migration incentives. Clean out the hazmat, fill the storm drains and sewers and in 10 years it will be a beautiful natural area.