The financial calamity with Detroit becoming the largest American city to file bankruptcy yesterday July 18th was a train wreck everybody knew was coming. Decades of deteriorating economic structure has culminated with Detroit being crushed with $18 billion dollars in liabilities leaving no choice for Detroit Emergency Manager Kevyn Orr but to file bankruptcy.
Michigan Governor Rick Snyder approved the bankruptcy filing with a terse comment, “Detroit is broke.”
The relentless process began decades ago with nearly 1.8 million people living in Detroit with the auto industry booming. Today only 700,000 people remain in Detroit and the flight of citizens and businesses have created a tremendous tax revenue void that could not sustain the borrowing and debt obligations.
City officials stated that 80,000 business locations are vacant with nearly 45,000 home structures abandoned which has contributed to the massive revenue drop from no tax revenue being generated. It was only a matter of time before the balloon burst since borrowing only postponed the inevitable.
The burden of unfunded liabilities from pensions and employee compensation has been eating away at revenue like an uncontrolled Pac-man. Government bailouts to Detroit businesses amounted to 100 billion dollars and accusations of government corruption and waste have been leveled.http://money.cnn.com/2013/07/18/news/economy/detroit-bankruptcy/index.html?source=cnn_bin
Where the government has failed, private faith based charities as the Detroit Rescue Mission has provided shelter and meals for thousands daily. The Rescue Mission has provided transitional housing, permanent housing, substance abuse support, mental health assistance, and programs to help rebuild the city.
Unfortunately severe cutbacks have done little to stop the runaway freight train of unsustainable debt that each Detroit administration passed on to the next one. During the last six years over 1000 police officers have not been replaced which has helped to grow a crime problem where Detroit has even beat out New York City for murders even though New York is ten times the population of Detroit.
City services have already been drastically cut back where even the street lights have been left 40% unlit in order to save Detroit’s power bill. Even with the massive cuts, 38 cents of every revenue dollar went to pay the debt service and pension costs, and it only was going to get much worse.
An effective counter attack to the culture of hopelessness is being staged by 120 faith based organizations and a group of 50,000 donors who are doing everything they can to remove Detroit as the worst city to live in the United States. Many believe there is a spiritual significance to combat the economic meltdown that has culminated in Detroit filing bankruptcy.
It will take a miracle with huge sacrifices for Detroit to successfully emerge out of bankruptcy with a viable economic plan. Creditors willing to take only 17 cents on the dollar and slashing unfunded liabilities in the pension structure will be the only way for Detroit to navigate out of its financial quagmire.
As with any problem, particularly financial ones, if you don’t fix it right away it will only get worse.