Detroit emergency manager: We’re flat broke and can’t borrow any more

posted at 6:51 pm on May 13, 2013 by Ed Morrissey

In other words, Kevyn Orr has reached the same conclusion as just about everyone else, outside of Detroit’s entrenched bureaucracy and political establishment.  In a report to be delivered to Michigan’s Treasurer today, the city’s emergency manager offers a “sobering wake-up call” that declares Motor City “insolvent,” with no ability to borrow further to meet its obligations.  Orr’s plan to turn Detroit around will require everyone to suffer the consequences, from bondholders to public employees:

Emergency Manager Kevyn Orr says the city of Detroit’s cash-flow crisis makes it “insolvent” and unable to borrow more money to mask over debts being made worse by skipping millions in payments for retiree pensions and health care.

After 45 days on the job, Orr’s initial assessment of Detroit’s perilous finances is laid bare in a 41-page report to be delivered today to state Treasurer Andy Dillon.

Calling it “a sobering wake-up call about the dire financial straits the city of Detroit faces,” Orr said he will use the report as a baseline for paring down the city’s $15.6 billion in debt and long-term liabilities. …

The emergency manager’s spokesman put the city’s predicament in more blunt terms. “We’re going to be out of money by the end of the year,” Nowling said Sunday. “If all we did was collect taxes and pay our debt, we couldn’t pay it off in 20 years. That’s the situation that we’re in now.”

And just how does Orr propose to do that?  Bondholders will get a haircut first, but then the city’s bloated public-sector liabilities will end up in the crosshairs:

Debt service on $1.8 billion in Pension Obligation Certificates and related swaps the city owes is expected to escalate over the next decade, with the principal alone more than doubling from $23.1 million this year to $56 million in 2023, according to Orr’s report.

Interest on the pension-related debt will be $83.8 million of the city’s $139.9 million in debt interest this year. … Retiree health care benefits aren’t constitutionally protected and could be wiped out by the emergency manager, Bernstein said.

That’s not the only area of the public sector Orr will target, either:

Orr described the city’s operations as “dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption.”

“Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st century government,” he said in the report. “A well run city will promote cost savings and better customer service and will encourage private investment and a return of residents.” …

It’s highly likely he will seek concessions from the city’s labor unions. At least five unions representing police and firefighters are seeking arbitration in collective bargaining with the city.

Detroit lacks, but is developing a “comprehensive labor strategy for managing” its relationships with its unions, according to Orr.

Unions are definitely lacking their usual leverage, for two reasons.  First, Orr is not an elected official but an appointed manager, which means he’s not susceptible to the usual inducements to provide a sympathetic posture to the PEUs.  Second, the law that created Orr’s position allows him to unilaterally terminate union contracts and force renegotiation from scratch, and Orr has already stated he’s willing to use that power:

The emergency manager law gives Orr the authority to “reject, modify or terminate” collective bargaining agreements and concessions will be sought, he wrote in the report.

“This power will be exercised, if necessary or desirable, with the knowledge and understanding that many city employees already have absorbed wage and benefit reductions,” he wrote.

There’s also a third problem for unions, which is the new right-to-work law in Michigan.  That forces them to collect their own dues rather than have the state collect them out of the paycheck directly.  They won’t have the usual power of forcibly-collected cash to fight Orr, and the descent of Detroit won’t make them terribly sympathetic to Michigan voters, either.

Can Orr save Detroit? Expect to hear a lot of requests for federal bailout cash if he doesn’t.


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NO! Don’t fix it. Let it rot. In fact, install webcams everywhere so the world can exactly what happens in Obamaville.

Watch it burn.
Watch it fall down.
Watch it die.

And then realize this is the fundamental change he promised.

BobMbx on May 13, 2013 at 6:56 PM

What I want to know is how the dastardly GOP sabotaged Detroit?! Heads must roll!

Charlemagne on May 13, 2013 at 6:57 PM

Obama’s America looks like Somalia.

Schadenfreude on May 13, 2013 at 6:57 PM

We are watching liberalism go down in flames….every story today is about the failures of the left.

esr1951 on May 13, 2013 at 6:58 PM

Expect to hear a lot of requests for federal bailout cash if he doesn’t.

Didn’t see that coming.

CW on May 13, 2013 at 7:00 PM

Of course with this type of situation it’s imperative to Disarm the innocent, lest criminal Democratic voters be injured whilst carrying out their private wealth redistribution trade..

Galt2009 on May 13, 2013 at 7:01 PM

Can Orr save Detroit?

Can he? Sure it will result in a much more nimble and competitive Detroit.

The real question is will he be allowed to save it? (Think Hostess for the answer)

Only when Detroit crashes and burns and the Unions that control it have no more control will Detroit emerge from the ashes.

F15Mech on May 13, 2013 at 7:02 PM

Wow, that was totally unexpected! Too bad no one could have possibly foreseen the disastrous effects of rampant liberalism! Welp, I’m sure there are no lessons to take away from all this. Not a one.

squint on May 13, 2013 at 7:02 PM

Hold on tight Detroit. ObamaCare full implementation is right around the corner. Obama says you’re already receiving the infinite benefits… you just don’t know it yet. I mean – if Obama says it…

drivingtheview on May 13, 2013 at 7:02 PM

They want a bailout from Obama for delivering him vote in November.

Just say NO!

Tater Salad on May 13, 2013 at 7:03 PM

NO! Don’t fix it. Let it rot. In fact, install webcams everywhere so the world can exactly what happens in Obamaville.

Watch it burn.
Watch it fall down.
Watch it die.

And then realize this is the fundamental change he promised.

BobMbx on May 13, 2013 at 6:56 PM

Did I award the Comment of the Day™ award already? I’m going to have to take it back from that other person.

De-troit!
De-troit!
Detroit is on fire!
We don’t need no water.
Let the <expletive deleted> burn!
Burn, <expletive deleted>, burn!

Steve Eggleston on May 13, 2013 at 7:05 PM

What I want to know is how the dastardly GOP sabotaged Detroit?! Heads must roll!

Charlemagne on May 13, 2013 at 6:57 PM

Not only did they sabotage Detroit, they smuggled in a secret GOP ‘manager’ to declare the city insolvent. All to make Democrats in general, and Obama in particular, look bad.

Liam on May 13, 2013 at 7:05 PM

Where is the Obama stash?

Cindy Munford on May 13, 2013 at 7:05 PM

Watch carefully, my fellow Californians…this is how it will go down here, except our state workers are even more overpaid, underworked, whiny, and entitled. They will burn down Sacramento and gut the state’s economy before accepting that the state can no longer pay for their opulent compensation packages.

Personally, I plan on packing up the wife, son, and dog and hightailing it to Boise before that all happens. Anyone up there willing to hire me? I promise to bring my borderline anarcho-capitalist views with me!

TheMightyMonarch on May 13, 2013 at 7:07 PM

First, Orr is not an elected official but an appointed manager, which means he’s not susceptible to the usual inducements to provide a sympathetic posture to the PEUs.

You underestimate the vulnerability of kneecaps.

squint on May 13, 2013 at 7:07 PM

Slightly OT…

First Liberator Spotted In The Wild?
http://www.thetruthaboutguns.com/2013/05/foghorn/first-liberator-spotted-in-the-wild/

Found this over on DefDist’s twitter feed, and it appears to be a Liberator printed in New Hampshire. The first of many, I’d bet.

Galt2009 on May 13, 2013 at 7:08 PM

Watch carefully, my fellow Californians…this is how it will go down here, except our state workers are even more overpaid, underworked, whiny, and entitled. They will burn down Sacramento and gut the state’s economy before accepting that the state can no longer pay for their opulent compensation packages.

Personally, I plan on packing up the wife, son, and dog and hightailing it to Boise before that all happens. Anyone up there willing to hire me? I promise to bring my borderline anarcho-capitalist views with me!

TheMightyMonarch on May 13, 2013 at 7:07 PM

Take SWalker with you. :)

22044 on May 13, 2013 at 7:08 PM

You mean Coleman Young, Kwame Kilpatrick and all of them other brilliant mofos didn’t make Detroit the shining city on the lake?

arnold ziffel on May 13, 2013 at 7:09 PM

Let them dwell opinion their own liberal cesspool

jaywemm on May 13, 2013 at 7:11 PM

NO! Don’t fix it. Let it rot. In fact, install webcams everywhere so the world can exactly what happens in Obamaville.

Watch it burn.
Watch it fall down.
Watch it die.

And then realize this is the fundamental change he promised.

BobMbx on May 13, 2013 at 6:56 PM

If only they’d listen… but no, I don’t think they will.

So failing that I say fix Detroit, point out just out how conservative policies and cutting out the bloat will make things better. Maybe hint that this is exactly what needs to take place on a larger scale and nonchalantly point to Obama’s government as the next one in line for this sort of change. We can hope, right?

Ukiah on May 13, 2013 at 7:12 PM

Oh, noes! What about all the medicaid “victims” that need ambulance service to the emergency room for a bad case of the sniffles? Oh noes!!!

/Let it burn. Then re-build.

Key West Reader on May 13, 2013 at 7:12 PM

You mean Coleman Young, Kwame Kilpatrick and all of them other brilliant mofos didn’t make Detroit the shining city on the lake?

arnold ziffel on May 13, 2013 at 7:09 PM

No. They made it the rotting city on the take.

Blake on May 13, 2013 at 7:12 PM

Bailout from Washington on the way.

rickv404 on May 13, 2013 at 7:14 PM

Maybe OCP should start construction of New Detroit right away…

SAZMD on May 13, 2013 at 7:14 PM

Hey… I see an opportunity here for Obama.

Key West Reader on May 13, 2013 at 7:16 PM

Dennis Kucinich isn’t doing anything relevant right now. Send him up to Detroit.

It obviously worked for him in Cleveland.

Myron Falwell on May 13, 2013 at 7:16 PM

Watch carefully, my fellow Californians…this is how it will go down here

meh, Houston is $6 billion under due to unfunded pensions and retiree health care. Started exactly 10 years ago under our first black mayor Lee. P. Brown. The paper won’t report it. I bet every city with dems in power are in the same boat with Illinois, California and New York going statewide in this regard.

DanMan on May 13, 2013 at 7:18 PM

“dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption.”

That was his first point. Ponder that.

WitchDoctor on May 13, 2013 at 7:24 PM

Here’s comes Obamamoney from his stash. Grab your wallets and run.

Philly on May 13, 2013 at 7:24 PM

so how was bush involved in detroits demise. no one has reported that at all yet.

t8stlikchkn on May 13, 2013 at 7:25 PM

Retiree health care benefits aren’t constitutionally protected and could be wiped out by the emergency manager, Bernstein said.

Wow! It’s a good thing they voted for Obamacare then, isn’t it? Free health care for all!!!!!

/s

RoadRunner on May 13, 2013 at 7:25 PM

No. They made it the rotting city on the take.

Blake on May 13, 2013 at 7:12 PM

Very good sir. We sure never saw this coming. eh?

arnold ziffel on May 13, 2013 at 7:26 PM

Romney’s fault.

tom daschle concerned on May 13, 2013 at 7:26 PM

The Ruins of Detroit” so very very sad to see this former beauty disappear.

Cindy Munford on May 13, 2013 at 7:29 PM

Detroit? Dead?

Boo-frickin’-hoo.

M240H on May 13, 2013 at 7:30 PM

Deem it as a World Heritage Site.

Force/Keep it exactly as it is.

aquaviva on May 13, 2013 at 7:32 PM

This article entirely misses the most important question.

What white Republican can the city leaders and the remaining citizens of Detroit blame this on?

29Victor on May 13, 2013 at 7:33 PM

Deem it as a World Heritage Site.

Force/Keep it exactly as it is.

aquaviva on May 13, 2013 at 7:32 PM

As a warning to others.

29Victor on May 13, 2013 at 7:34 PM

Rick Snyder made an awesome choice with this man, Mr. Orr. Being from the Detroit area I give him major credit for trying to help resolve this situation.

The last man with this much testicular fortitude was Robert Bobb, who was assigned the task of trying to clean of the dept of education in Detroit. He was black as well, and tried his damndest, to no avail. Now I hear he wants to run for mayor of DC and I salute him, he’d be the best thing to happen to that city in forever.

Truth is, they don’t WANT help in Detroit, they want to be subsidized to eternity by everyone else. Problem is, everyone else has run out of money, and patience.

waterytart on May 13, 2013 at 7:34 PM

The MadNess of MoTown!

canopfor on May 13, 2013 at 7:36 PM

Didn’t Obama crow about “Osama is dead and GM is alive” during the election? Isn’t GM in Detroit? Haven’t we all then already done enough to bail out the Motor City?

Not one more dime for them.

natasha333 on May 13, 2013 at 7:36 PM

And then realize this is the fundamental change he promised.

BobMbx on May 13, 2013 at 6:56 PM

They will never, ever realize this. From the womb inner-city Democrats are taught that nothing bad that happens to them is ever their fault.

29Victor on May 13, 2013 at 7:36 PM

The last man with this much testicular fortitude was Robert Bobb, who was assigned the task of trying to clean of the dept of education in Detroit.

waterytart on May 13, 2013 at 7:34 PM

The guy’s name was really “Bob Bobb?” How awesome.

29Victor on May 13, 2013 at 7:38 PM

“The Ruins of Detroit” so very very sad to see this former beauty disappear.

Cindy Munford on May 13, 2013 at 7:29 PM

A crying shame, all that magnificent old architecture left to decay. And all the books abandoned in the libraries!

Awful.

Liam on May 13, 2013 at 7:39 PM

Deem it as a World Heritage Site.

Force/Keep it exactly as it is.

aquaviva on May 13, 2013 at 7:32 PM

Why? Wouldn’t it be better for the environment to bulldoze the city, eliminate all traces of it, and put a national forest or something in its’ place?

Myron Falwell on May 13, 2013 at 7:41 PM

Someone call Omni Consumer Products, quick!

Midas on May 13, 2013 at 7:43 PM

If Obama had a city, it would look like Detroit…

JohnGalt23 on May 13, 2013 at 7:46 PM

Detroit Broke City (apologies to Kiss)

raz0r on May 13, 2013 at 7:54 PM

Detroit, America’s future if democrats stay in charge for much longer

sadsushi on May 13, 2013 at 7:54 PM

Liam on May 13, 2013 at 7:39 PM

Yeah, I noticed that the books were the only thing not looted.

OldEnglish on May 13, 2013 at 7:56 PM

First, change its name to Obamatown

profitsbeard on May 13, 2013 at 7:58 PM

Can Orr save Detroit?

Ed Morrisey

.
Can he? Sure it will result in a much more nimble and competitive Detroit.

The real question is will he be allowed to save it? (Think Hostess for the answer)

Only when Detroit crashes and burns and the Unions that control it have no more control will Detroit emerge from the ashes.

F15Mech on May 13, 2013 at 7:02 PM

.
Yup.

listens2glenn on May 13, 2013 at 8:07 PM

Let the public union pigs burn down the whole pathetic city because they won’t be “getting theirs”.

Who was that Lib jerk journalist who proposed that the Southern states secede, in order to have a Northern paradise with “strong unions, no guns, and same sex marriage”? I remember reading his article a thinking, they should rename Northistan “Detroit”.

ardenenoch on May 13, 2013 at 8:09 PM

Are Ayn Rand’s Atlas Shrugged villains still looking as two dimensional? Or, put another way, are the real world villains really all that three dimensional? Or, put another way, if you were a crazy Russian midget with an obsessive-compulsive tweak and a pining need for order, and you always started your understandings of things with A is A out of psychological necessity, do you think you would deserve a break if things, in the end, really turned out to be as dull and predictable as you always said they were?

Where’s Dagny. I want Dagny.

Axe on May 13, 2013 at 8:29 PM

Run by the Left since 1962….

RIP, Motown.

socalcon on May 13, 2013 at 8:30 PM

WHAT? Deee-troit is a Democratic power bastion! It’s a “Worker’s Paradise”. The city represents liberal Democratic thought, practice and management style writ LARGE.

What could go wrong?

They just need to raise the taxes on the rich!

GarandFan on May 13, 2013 at 8:43 PM

The sad part is this. In an unfettered, free economy where things are allowed to bottom out, and governments don’t prop up favored interests and themselves with tax funds and debt that will never be paid back, you’d see entrepreneurs gobbling up these properties for pennies on the dollar to refurbish and make something out of them.

As it is, anyone with capital to spend knows to stay far, far away from this place. By the time it completely collapses there will be nothing salvageable for entrepreneurs to buy.

TheMightyMonarch on May 13, 2013 at 8:46 PM

- so long as the Water Department union doesn’t have to lay-off their $56k/yr farrier.

What? You think I’m kidding? http://bit.ly/13uabid
/.

CaveatEmpty on May 13, 2013 at 9:08 PM

The only thing good to come out of Detroit is house and techno.

tom daschle concerned on May 13, 2013 at 9:26 PM

The sad part is this. In an unfettered, free economy where things are allowed to bottom out, and governments don’t prop up favored interests and themselves with tax funds and debt that will never be paid back, you’d see entrepreneurs gobbling up these properties for pennies on the dollar to refurbish and make something out of them.

As it is, anyone with capital to spend knows to stay far, far away from this place. By the time it completely collapses there will be nothing salvageable for entrepreneurs to buy.

TheMightyMonarch on May 13, 2013 at 8:46 PM

This is an excellently-stated point…and a sobering one.

In techie terms, the free market has an excellent way of preventing “count to infinity” as good money is thrown into sinkholes, debt “counts” further into the red, and property degenerates to Third-World levels. At some point the “unreachable” metric will be hit, and the system will effectively reset itself.

But with such brilliant liberal policies like the ones ruining Chicago, that doesn’t happen. In such systems more and more capital is poured into unsalvageably bad investments until the lords and masters deem otherwise for any reason from saving face to wanting to pound money down a different rathole. Money is wasted on property that degenerates until it is finally unusable for anything but the scrap pile and demolition crews.

MelonCollie on May 13, 2013 at 9:40 PM

Liam on May 13, 2013 at 7:39 PM

Yeah, I noticed that the books were the only thing not looted.

OldEnglish on May 13, 2013 at 7:56 PM

Barbarians do one of three things with books: ignore them, use them as kindling, or intentionally destroy them because they know with knowledge comes civilization and order and rules, all of which they despise.

MelonCollie on May 13, 2013 at 9:43 PM

Time warp again; back to a Cyprus thread dated March 28th!

slickwillie2001 on May 13, 2013 at 11:03 PM

A city that is set ablaze every Halloween, riotous after a major sports team wins a national championship, has council members who think that using the term “black hole” is racist and spends welfare money like sand is bankrupt … I don’t understand?

kregg on May 14, 2013 at 5:40 AM

Sell the city to OCP and be done with it.

Gatsu on May 14, 2013 at 7:56 AM

The Welfarewonderland that has been run into the ground by democrats is making national headlines? For being a stinky rotten hole LOL. Like anyone cares….where is two penny Jenny now?

What a f’n joke she was….and yet we still have people p and m’ing about our Repubican governor that has to clean up this mess. Detroit is geographically positioned perfectly if you look at Michigan as a person.

I need to thank my parents for moving us out of that cesspool in the 70′s. There’s so much more to Michigan than the stinky hole at the bottom of the state.

WelfareWonderland on May 14, 2013 at 8:15 AM

Run by the Left since 1962….
RIP, Motown.
socalcon on May 13, 2013 at 8:30 PM

We’re fast developing enough data points to construct a Thatcher Curve: Sooner or later….

Barnestormer on May 14, 2013 at 8:45 AM

A city that is set ablaze every Halloween, riotous after a major sports team wins a national championship, has council members who think that using the term “black hole” is racist and spends welfare money like sand is bankrupt … I don’t understand?

kregg on May 14, 2013 at 5:40 AM

HEY…. I take exception about what you said.

-As for burning down the city every Halloween. The number of burning homes have been dropping over the last 30 years. Thanks to an aware local neighborhood watch and the scarcity of homes left to burn.

-Riots only happen from local university sporting events that win. Never once in all my life have I seen a riot in Detroit over a Lions Super bowl win. I did see a riot end from a Tigers baseball World series win back in 1968 through.

-As for the continuous string of ignorant and stupid elected officials who represent and mirror the thinking and education level of the people of Detroit….. well your right about that.

So enough of the Detroit bashing, thank you very much.

Yours cordially,

Mechkiller_k

(living north of the DMZ line known as 8 mile road from that rotting cesspool of a city that was once a global leader of industry before the Liberals took it over)

mechkiller_k on May 14, 2013 at 9:14 AM

The guy’s name was really “Bob Bobb?” How awesome.

29Victor on May 13, 2013 at 7:38 PM

Yes it is and yes he was. He took on a thankless job and was ripped apart by the people he was trying to help.

mechkiller_k on May 14, 2013 at 9:19 AM

Galt2009 on May 13, 2013 at 7:08 PM

University of Michigan colors. Nice.

mechkiller_k on May 14, 2013 at 9:22 AM

I hope Mr. Orr lives in a fortress with big fences and about a hundred armed guards. If/when he starts using his authority to “reject, modify or terminate” collective bargaining agreements, he’ll become target #1 for a lot of nasty people. There’s big money in corruption, the beneficiaries won’t let go so easy. This is Detroit we’re talking about.

Strap on some body armor, Kevyn. You’re in for one helluva ride.

Archer on May 14, 2013 at 9:24 AM

You know what this leads to…

http://www.youtube.com/watch?v=wA_P8CaNwro

fusionaddict on May 14, 2013 at 10:18 AM

If Orr can save Detroit, it will be a good warm-up for the main-event to come:
Saving Los Angeles!

Bankruptcy in 10…9…8…7…

Another Drew on May 14, 2013 at 3:41 PM