Detroit delusions of financial solvency still plague the city

What do we know for sure? Detroit, the Motor City, is bankrupt. Part of the reason is clearly the incompetence of previous city officials, but part of the blame can also be placed on the sagging economy, high crime rate, and housing bust.

Financially, the city is now in the hands of Emergency Manager Kevyn Orr, who was appointed by Governor Rick Synder in March to get the city’s finances in order. He attempted to solve the problem for awhile before eventually filing Chapter 9 bankruptcy, realizing severe cuts weren’t going to be enough to stop the city from crumbling.

Delusion still reigns in Detroit

 

What doesn’t seem to be so obvious to the residents of the city is it is no longer a cash cow or the auto capital of the world. There are no more high dollar insurance plans, high salaries or outlandish retirement benefits available. The city is officially broke.

Why can’t city officials and residents see reality? We’re not sure. While Orr continues to fight to salvage the city, many employees are fighting to keep 100% of their pensions. But guess what? There is no money. Although most of the residents of Detroit still say they oppose cutting benefits to Detroit workers, it’s time to realize that to save the city wages will have to be slashed, some bills will not be paid, and it is likely bondholders and pension holders will both have to make some compromises.

City officials battle with each other

 

But instead of putting their heads together and finding a way to save the city, opponents of Governor-appointed emergency manager Orr have been fighting Orr every step of the way. In fact, in a recent mayoral campaign Mayor-elect Duggan has argued that his first task, if he is elected, is to ask Gov. Snyder to get rid or Orr.

But Orr seems to be the only one with his eye on the ball. In fact, it has become more and more obvious that Governor Snyder made a brave decision to bring in an outsider to do what no one else in the city seems to have the stomach to do. Right now, the city’s pension fund is $3.5 billion in the red, and although city officials continue to block any reduction, it may be up to Orr to convince everyone that benefits must be cut to eliminate the gap.

Unfortunately, living large wasn’t restricted to only state employees. According to CNN, “Orr was forced to fire the chairman of the Detroit General Retirement System who took an all-expenses-paid trip to a pension conference in Hawaii earlier this year.” This reminds me of the banks giving large bonuses right after they got the federal bailout money.

There seems to be an increasing gap between those who accept that you cannot spend what you do not have and those that don’t seem to mind robbing others to get what they want. Pensions and retirement funds come from the citizens of a city or state. State governments, unlike the Federal Government, can’t “print” money. So unlike the Federal Government that continues to print money and the automakers who got a federal bailout- there isn’t anyone to rescue Detroit.

It will be up to the new mayor, the city council, and its 700,000 remaining residents to accept that the days of living large are gone, and right now Orr seems to the only one not drinking the Kool-Aid.

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.