'Bleak' outlook for Detroit

It's tough reading the excerpts from Kevynn Orr, Detroit's emergency fiscal manager without wondering how in the world the city is going to overcome its problems.

A few tidbits:

But Orr reports that Detroit's net cash position was negative $162 million as of April 26 and that the projected budget deficit is expected to reach $386 million in less than two months.

He also warns that the city's financial health might change as more data is collected and analyzed.

"What is clear, however, is that continuing along the current path is an ill-advised and unacceptable course of action if the city is to be put on the path to a sustainable future."

[...]

Orr described the city's operations as "dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption."

"Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st century government," he said in the report. "A well run city will promote cost savings and better customer service and will encourage private investment and a return of residents."

The report also looked at attempts officials have made to fix problems.

"Recently, tens of millions of dollars of pension funding and other payments have been deferred to manage a severe liquidity crisis at the City," Orr wrote in the report. "Even with these deferrals, the City has operated at a significant and increasing deficit. It is expected that the City will end this fiscal year with approximately $125 million in accumulated deferred obligations and a precariously low cash position."

The city also owes more than $400 million in outstanding obligations, including $124 million used to provide funds for public improvement projects.

One of the city's major problems - and one targeted for immediate attention - is public employee unions. Orr has been given the authority to reform the city's relationship with its organized labor groups:

The emergency manager law gives Orr the authority to "reject, modify or terminate" collective bargaining agreements and concessions will be sought, he wrote in the report.

"This power will be exercised, if necessary or desirable, with the knowledge and understanding that many city employees already have absorbed wage and benefit reductions," he wrote.

When taking the job, Orr said he hoped to avoid a municipal bankruptcy filing, but didn't rule one out if Detroit can't reach agreements with its many creditors and bond holders.

It's difficult to envision a day when Detroit gets out from under its huge debt. Bankruptcy won't solve anything except to move decimal points around. And it looks like Michigan taxpayers are going to be saddled with making good on pension payments that the city has deferred.

Detroit is a train wreck that is so horrific it is hard to take your eyes away from watching as it happens.



It's tough reading the excerpts from Kevynn Orr, Detroit's emergency fiscal manager without wondering how in the world the city is going to overcome its problems.

A few tidbits:

But Orr reports that Detroit's net cash position was negative $162 million as of April 26 and that the projected budget deficit is expected to reach $386 million in less than two months.

He also warns that the city's financial health might change as more data is collected and analyzed.

"What is clear, however, is that continuing along the current path is an ill-advised and unacceptable course of action if the city is to be put on the path to a sustainable future."

[...]

Orr described the city's operations as "dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption."

"Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st century government," he said in the report. "A well run city will promote cost savings and better customer service and will encourage private investment and a return of residents."

The report also looked at attempts officials have made to fix problems.

"Recently, tens of millions of dollars of pension funding and other payments have been deferred to manage a severe liquidity crisis at the City," Orr wrote in the report. "Even with these deferrals, the City has operated at a significant and increasing deficit. It is expected that the City will end this fiscal year with approximately $125 million in accumulated deferred obligations and a precariously low cash position."

The city also owes more than $400 million in outstanding obligations, including $124 million used to provide funds for public improvement projects.

One of the city's major problems - and one targeted for immediate attention - is public employee unions. Orr has been given the authority to reform the city's relationship with its organized labor groups:

The emergency manager law gives Orr the authority to "reject, modify or terminate" collective bargaining agreements and concessions will be sought, he wrote in the report.

"This power will be exercised, if necessary or desirable, with the knowledge and understanding that many city employees already have absorbed wage and benefit reductions," he wrote.

When taking the job, Orr said he hoped to avoid a municipal bankruptcy filing, but didn't rule one out if Detroit can't reach agreements with its many creditors and bond holders.

It's difficult to envision a day when Detroit gets out from under its huge debt. Bankruptcy won't solve anything except to move decimal points around. And it looks like Michigan taxpayers are going to be saddled with making good on pension payments that the city has deferred.

Detroit is a train wreck that is so horrific it is hard to take your eyes away from watching as it happens.



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