Detroit is ‘insolvent,’ according to emergency manager
The city of Detroit, Michigan is days away from running out of money, and a state-appointed emergency manager says the situation is dire.
Kevyn Orr was hired by Michigan back in March to meet with
leaders in Detroit to try and figure a way to save the
once-thriving city from total bankruptcy. On Sunday he released the
first report to show his findings over the past month and a half,
and his assessment painted a picture of a city in far worse shape
than many thought.
According to Orr’s report, the one-time headquarters of the
automobile industry is one month away from running out of cash yet
owes billions.
“The City of Detroit continues to incur expenditures in
excess of revenues despite cost reductions and proceeds from
long-term debt issuances,” Orr wrote. “In other words,
Detroit spends more than it takes in – it is clearly insolvent on a
cash flow basis.”
“Without a significant restructuring of its debt, the city
will be unable to break the cycle of damaging cutbacks in essential
municipal services and investments,” the study found.
Michigan Governor Rick Snyder said in March of Detroit that
“There’s probably no city that’s more financially challenged in
the entire United States.” He declared a state of fiscal emergency at the time and told
Detroit Mayor David Bing that he’d be appointing an emergency
manager — Orr — to assist with operations.
Initially, the Detroit City Council rejected the governor’s
decision.
“We feel like we have the tools necessary to do it, that
somebody else does not have to come in and do it for us,”
Council President Charles Pugh told the Associated Press at the
time.
Ultimately, Snyder sent Orr to assess the situation, a decision
Bing endorsed because, according to him, “we have to learn to
make the best out of a bad situation.” Now with the completion
of Orr’s first report, the details of that dilemma are being fully
revealed.
Orr wrote that a number of issues are keeping Detroit from
staying afloat much longer, including an ever-growing deficit,
loads of liabilities and rampant mismanagement in terms of city
services. At the end of fiscal year 2012, Detroit had “negative
cash flows of $115.5 million” and things have only worsened. By the
end of April the city was holding onto $64 million cash, but was
obligated to the tune of roughly $226 million.
Orr found additionally that the city has liabilities including
pension obligations, bonds and loans totaling $9.4 billion —
including $5.7 billion in unfunded retiree benefit obligations —
and expects the total deficit to top $380 million by June 30. At
that point, the city will have
This article originally appeared on : RT
Source: http://rinf.com/alt-news/breaking-news/detroit-is-insolvent-according-to-emergency-manager/33213/
