Post by jeffolie on Feb 20, 2013 9:21:07 GMT -6
" ..... jeffolie predicts…2013 Predictions January 1st
Make your predictions for 2013.
Here are mine:
jeffolie predicts…US STATES, CITIES, LOCAL AGENCIES CRISIS: major layoffs by the end of 2013, bills will not be paid, some bonds will default.
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February 20, 2013
Review team: Detroit faces financial crisis, has no plan to fix it
Fiscal emergency tied to cash crunch, deficits, long-term liabilities
Detroit — For the second time in a year, a state review team has found Detroit is in a financial emergency that requires Gov. Rick Snyder to intervene in City Hall.
But this time, if Snyder agrees that a financial emergency exists, the governor's choices are more limited. He could appoint an emergency manager to keep Michigan's largest city from plunging into bankruptcy, experts say, or he could continue state financial supervision through a new consent agreement, which seems a faint possibility.
State Treasurer Andy Dillon ruled out a bankruptcy filing at this time.
The six-member review team unanimously concluded in a report released Tuesday that the city failed to restructure its debt-laden bureaucracy under the financial consent agreement signed in April and that Detroit's financial crisis requires Snyder's intervention "because no satisfactory plan exists to resolve a serious financial problem."
"We gave the city every chance to avoid the outcome we're recommending to the governor today," said Dillon, who led the review team.
He was more direct in an interview after the press conference.
"The city doesn't have more time," Dillon said. "They have limited cash right now, limited ability to access capital markets. I kind of think they've got one more bite of the apple to get it right."
In a sobering report to Snyder, the review team found Detroit has:
A cash-flow deficit of more than $100 million without "significant spending cuts" by June 30, on top of an accumulated deficit of $327 million.
$14.9 billion, including unfunded pension and employee retirement liabilities. The city also needs $1.9 billion during the next five years to make payments for the liabilities, but city officials have no debt payment plan.
Accumulated deficits in the general fund of $155.4 million to $331.9 million annually since the 2005 fiscal year.
Dillon said the city has been "masking over" annual deficits with long-term borrowing. The report said that without the borrowing, the deficits would total $937 million in fiscal year 2012.
"We believe there's a financial emergency in the city and that there's no plan in place to correct the situation," Dillon said.
Chapter 9 bankruptcy is "always a possibility but I don't think the city should go through (Chapter) 9 to cure its ailments," he added.
The review team said the city's charter adds "numerous restrictions" and hurdles for closing departments, canceling contracts and the type of wholesale restructuring financial experts say is necessary to make city government live within its means.
Under the consent agreement, progress in restructuring the city has been slowed by lawsuits and council moves like rejecting a bid to make Belle Isle a state park.
James McTevia, a Bingham Farms private-sector turnaround specialist, said the report showed Snyder can't avoid appointing an emergency manager like he did in 2012.
"It's clear there is no way Mayor (Dave) Bing and the government are going to be able to solve the problem — because they can't," McTevia said. "People aren't going to be happy, but what are they going to do? Let Detroit collapse into a deterioration where there is lawlessness in the streets?"
Bing and Council President Charles Pugh said they were not surprised by the review team's findings. "The question is: What is the governor going to do?" Pugh said.
Bing said Snyder has issues to consider before installing an emergency manager. "If the governor decides to appoint an emergency financial manager, he or she, like my administration, is going to need resources — particularly in the form of cash and additional staff."
Clock ticking for gov
Last week, Snyder said his administration has been "talking" to possible candidates for emergency manager of Detroit. But Snyder still could negotiate another consent pact with Bing and the Detroit City Council, Dillon said. "That's for him to consider. He'll take his time to study the report and be thoughtful."
Another review team member, Frederick Headen, said Detroit residents deserve better.
"Right now the residents of Detroit pay exorbitant taxes and have very little to show for it," said Headen, a legal adviser to the state Treasury Department. "That needs to change."
Snyder has 30 days to accept or reject the review team's findings, but there's no statutory deadline for him to appoint an emergency manager, if that's what he chooses to do. There hasn't been a situation in which an emergency was declared in Michigan and an emergency manager was not appointed.
However, the governor faces a March 28 deadline to appoint a manager before a new emergency manager law goes into effect. Under the new law, any emergency manager in place under the old law remains without the approval of local officials.
When the new law takes effect, the emergency financial manager would have the legal power to tear up and redo labor contracts.
If Snyder declares a financial emergency, Bing or the City Council has 10 days to request a hearing to ask Snyder or a representative of his choosing to reconsider the declaration.
Outside experts said Monday they think Detroit is on a collision course for an emergency financial manager — a fate that Bing and the nine-member City Council still hope to avoid.
"A lot of the ingredients for the turnaround of the city are in place," Dillon said. "Now we have to execute."
Reaction mixed
Community activist Sandra Hines objected to the review team's finding. She is part of the group Free Detroit No Consent, which opposed the city's consent agreement with the state.
"We have a mayor. We have a council," Hines said. "We feel it's nothing the city can't handle."
Municipal bankruptcy expert Douglas Bernstein said state officials may have concluded it's time to face Detroit's financial problems head-on. "It's a realization that what's been going on hasn't worked in providing a cure and it's an admission that we've hit rock bottom (or) close to hitting rock bottom."
At a community meeting Tuesday night, Councilman James Tate said the city has made progress reducing its debt. But he doesn't see how the state could quickly resolve the city's long-term debt issues. "How are you going to do it in a short period of time?"
clivengood@detroitnews.com
(517) 371-3660
Staff Writers Gary Heinlein and Candice Williams contributed.
What’s next
Gov. Rick Snyder gets 30 days to accept or reject the review team's finding that Detroit has a "financial emergency."
If Snyder agrees that an emergency exists, Detroit Mayor Dave Bing or the nine-member City Council can request a hearing to reconsider his finding within 10 days. Snyder or someone he selects would conduct the hearing and decide whether to confirm or revoke his earlier decision.
If Snyder decides on an emergency manager, he has said he would want to select one quickly — even though there is no statutory time limit to choose one. The decision to pursue an emergency manager, experts said, would likely occur before a new law takes effect on March 28 giving an emergency financial manager broader powers — and giving Detroit the choice of four remedy options to pursue: mediation, another consent decree, a bankruptcy filing or an emergency financial manager.
Why a financial emergency was declared
<cci:bullet class="macro" displayname="bullet" name="bullet"/>Cash crunch: A cumulative cash deficit estimated at $100 million by June 30. Reforms by the council and Mayor Dave Bing have been weighted toward one-time savings and apply only to non-union employees.
Budget deficits: If the city hadn't issued debt bonds, its accumulated deficits since 2004 would total $936.8 million in fiscal year 2012. The deficit is $326 million for the current year.
Long-term liabilities: On June 30, 2012, the city’s long-term liabilities exceeded $14 billion. The city needs $1.9 billion to fund certain liabilities during the next five years but there is no plan how to do so.
City charter: The charter contains numerous restrictions and structural impediments that make it difficult for city officials to restructure operations in a timely manner.
From The Detroit News: www.detroitnews.com/article/20130220/METRO01/302200361#ixzz2LS7Q8TIv
Make your predictions for 2013.
Here are mine:
jeffolie predicts…US STATES, CITIES, LOCAL AGENCIES CRISIS: major layoffs by the end of 2013, bills will not be paid, some bonds will default.
==================================================
February 20, 2013
Review team: Detroit faces financial crisis, has no plan to fix it
Fiscal emergency tied to cash crunch, deficits, long-term liabilities
Detroit — For the second time in a year, a state review team has found Detroit is in a financial emergency that requires Gov. Rick Snyder to intervene in City Hall.
But this time, if Snyder agrees that a financial emergency exists, the governor's choices are more limited. He could appoint an emergency manager to keep Michigan's largest city from plunging into bankruptcy, experts say, or he could continue state financial supervision through a new consent agreement, which seems a faint possibility.
State Treasurer Andy Dillon ruled out a bankruptcy filing at this time.
The six-member review team unanimously concluded in a report released Tuesday that the city failed to restructure its debt-laden bureaucracy under the financial consent agreement signed in April and that Detroit's financial crisis requires Snyder's intervention "because no satisfactory plan exists to resolve a serious financial problem."
"We gave the city every chance to avoid the outcome we're recommending to the governor today," said Dillon, who led the review team.
He was more direct in an interview after the press conference.
"The city doesn't have more time," Dillon said. "They have limited cash right now, limited ability to access capital markets. I kind of think they've got one more bite of the apple to get it right."
In a sobering report to Snyder, the review team found Detroit has:
A cash-flow deficit of more than $100 million without "significant spending cuts" by June 30, on top of an accumulated deficit of $327 million.
$14.9 billion, including unfunded pension and employee retirement liabilities. The city also needs $1.9 billion during the next five years to make payments for the liabilities, but city officials have no debt payment plan.
Accumulated deficits in the general fund of $155.4 million to $331.9 million annually since the 2005 fiscal year.
Dillon said the city has been "masking over" annual deficits with long-term borrowing. The report said that without the borrowing, the deficits would total $937 million in fiscal year 2012.
"We believe there's a financial emergency in the city and that there's no plan in place to correct the situation," Dillon said.
Chapter 9 bankruptcy is "always a possibility but I don't think the city should go through (Chapter) 9 to cure its ailments," he added.
The review team said the city's charter adds "numerous restrictions" and hurdles for closing departments, canceling contracts and the type of wholesale restructuring financial experts say is necessary to make city government live within its means.
Under the consent agreement, progress in restructuring the city has been slowed by lawsuits and council moves like rejecting a bid to make Belle Isle a state park.
James McTevia, a Bingham Farms private-sector turnaround specialist, said the report showed Snyder can't avoid appointing an emergency manager like he did in 2012.
"It's clear there is no way Mayor (Dave) Bing and the government are going to be able to solve the problem — because they can't," McTevia said. "People aren't going to be happy, but what are they going to do? Let Detroit collapse into a deterioration where there is lawlessness in the streets?"
Bing and Council President Charles Pugh said they were not surprised by the review team's findings. "The question is: What is the governor going to do?" Pugh said.
Bing said Snyder has issues to consider before installing an emergency manager. "If the governor decides to appoint an emergency financial manager, he or she, like my administration, is going to need resources — particularly in the form of cash and additional staff."
Clock ticking for gov
Last week, Snyder said his administration has been "talking" to possible candidates for emergency manager of Detroit. But Snyder still could negotiate another consent pact with Bing and the Detroit City Council, Dillon said. "That's for him to consider. He'll take his time to study the report and be thoughtful."
Another review team member, Frederick Headen, said Detroit residents deserve better.
"Right now the residents of Detroit pay exorbitant taxes and have very little to show for it," said Headen, a legal adviser to the state Treasury Department. "That needs to change."
Snyder has 30 days to accept or reject the review team's findings, but there's no statutory deadline for him to appoint an emergency manager, if that's what he chooses to do. There hasn't been a situation in which an emergency was declared in Michigan and an emergency manager was not appointed.
However, the governor faces a March 28 deadline to appoint a manager before a new emergency manager law goes into effect. Under the new law, any emergency manager in place under the old law remains without the approval of local officials.
When the new law takes effect, the emergency financial manager would have the legal power to tear up and redo labor contracts.
If Snyder declares a financial emergency, Bing or the City Council has 10 days to request a hearing to ask Snyder or a representative of his choosing to reconsider the declaration.
Outside experts said Monday they think Detroit is on a collision course for an emergency financial manager — a fate that Bing and the nine-member City Council still hope to avoid.
"A lot of the ingredients for the turnaround of the city are in place," Dillon said. "Now we have to execute."
Reaction mixed
Community activist Sandra Hines objected to the review team's finding. She is part of the group Free Detroit No Consent, which opposed the city's consent agreement with the state.
"We have a mayor. We have a council," Hines said. "We feel it's nothing the city can't handle."
Municipal bankruptcy expert Douglas Bernstein said state officials may have concluded it's time to face Detroit's financial problems head-on. "It's a realization that what's been going on hasn't worked in providing a cure and it's an admission that we've hit rock bottom (or) close to hitting rock bottom."
At a community meeting Tuesday night, Councilman James Tate said the city has made progress reducing its debt. But he doesn't see how the state could quickly resolve the city's long-term debt issues. "How are you going to do it in a short period of time?"
clivengood@detroitnews.com
(517) 371-3660
Staff Writers Gary Heinlein and Candice Williams contributed.
What’s next
Gov. Rick Snyder gets 30 days to accept or reject the review team's finding that Detroit has a "financial emergency."
If Snyder agrees that an emergency exists, Detroit Mayor Dave Bing or the nine-member City Council can request a hearing to reconsider his finding within 10 days. Snyder or someone he selects would conduct the hearing and decide whether to confirm or revoke his earlier decision.
If Snyder decides on an emergency manager, he has said he would want to select one quickly — even though there is no statutory time limit to choose one. The decision to pursue an emergency manager, experts said, would likely occur before a new law takes effect on March 28 giving an emergency financial manager broader powers — and giving Detroit the choice of four remedy options to pursue: mediation, another consent decree, a bankruptcy filing or an emergency financial manager.
Why a financial emergency was declared
<cci:bullet class="macro" displayname="bullet" name="bullet"/>Cash crunch: A cumulative cash deficit estimated at $100 million by June 30. Reforms by the council and Mayor Dave Bing have been weighted toward one-time savings and apply only to non-union employees.
Budget deficits: If the city hadn't issued debt bonds, its accumulated deficits since 2004 would total $936.8 million in fiscal year 2012. The deficit is $326 million for the current year.
Long-term liabilities: On June 30, 2012, the city’s long-term liabilities exceeded $14 billion. The city needs $1.9 billion to fund certain liabilities during the next five years but there is no plan how to do so.
City charter: The charter contains numerous restrictions and structural impediments that make it difficult for city officials to restructure operations in a timely manner.
From The Detroit News: www.detroitnews.com/article/20130220/METRO01/302200361#ixzz2LS7Q8TIv