Auto industry glitz fails to masquerade Detroit's slide into insolvency
As city edges towards bankruptcy, chance of federal bailout remains slim to none
Detroit, the city that symbolizes the U.S. industry got a taste of the high life over the past few weeks with the Auto Show. Bentleys and Maseratis gleamed on showroom floors and a charity ball saw many attendees putting on the Ritz. The city, sadly finds itself still going over the cliff with bankruptcy a given thing. And quite unlike General Motors Co., Chrysler and Ford Motor Co. chances of a federal bailout remain highly slim.
In addition to a decline in population, Detroit suffers from high unemployment related to a loss of businesses, a flood of home foreclosures and a cut in state funding.
Michigan Governor Rick Snyder last month appointed a team to scour the city's books. The audit could result in a state takeover of Detroit's finances through the appointment of an emergency financial manager, who could then propose federal bankruptcy court as the best option.
Snyder, who has called the situation "a crisis in terms of financial affairs," said the team would deliver its report next month.
"Detroit is teetering on the verge of bankruptcy after the City Council has failed to make the necessary cuts to deal with having a smaller population," Rick Jones, chairman of the Republican majority caucus in the state Senate says.
While he does not favor a bankruptcy, Jones said he would like to see an emergency manager installed. If that failed, there would be a case for finding a way to shrink the Detroit municipal area.
Down 30 percent since 1990, the city's population is now just over 700,000, while still having to provide services to an area encompassing more land than San Francisco, Boston and the borough of Manhattan.
While Mayor Dave Bing and the Detroit City Council have moved to reduce spending and initiate some reforms to stave off a takeover, it may still not be enough.
Detroit was America's fifth-largest city during the post World War II era. Today, it ranks 18th. In addition to a decline in population, it suffers from high unemployment related to a loss of businesses, a flood of home foreclosures and a cut in state funding.
Detroit has been left unable to afford a workforce of more than 10,000 and the surging health and pension costs that go with them and with its retirees. Credit ratings on Detroit's approximately $8.2 billion of outstanding debt have sent it into junk territory.
The city's labor costs, including health care and pensions, are shrinking in absolute terms but rising as a share of the budget. They are slated to drop to $968 million, or nearly 49.5 percent of the operating budget, in the fiscal year ending June 30 versus $1.14 billion, or 45.5 percent, a year earlier.
© 2013, Distributed by NEWS CONSORTIUM.
Pope Francis Prayer Intentions for December 2013
General Intention: Victimized Children. That children who are victims of abandonment or violence may find the love and protection they need.
Missionary Intention: Prepare the Savior's Coming. That Christians, enlightened by the Word incarnate, may prepare humanity for the Savior's coming.
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