Detroit May File for Bankruptcy

Daniel Greenfield, a Shillman Journalism Fellow at the Freedom Center, is a New York writer focusing on radical Islam. He is completing a book on the international challenges America faces in the 21st century.


A vacant, boarded up house is seen in the once thriving Brush Park neighborhood with the downtown Detroit skyline behind it in Detroit,

Obama bailed out GM and Chrysler, but from the looks of things, before too long he may have to bail out all of Motor City.

In a report to be presented to Michigan’s treasurer on Monday, Kevyn D. Orr, the emergency manager appointed in March to take over operations here, described long-term obligations of at least $15 billion, unsustainable cash flow shortages and miserably low credit ratings that make it difficult to borrow.

Detroit’s problem though is America’s problem.

“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.”

Detroit had only $64 million in cash on hand and current obligations of $226 million on April 26, 2013, a negative net cash position of $162 million, the report said.

Operating expenditures have exceeded revenues by about $100 million a year since 2008. Payments of Detroit’s long-term debt are eating up nearly 20 percent of Detroit’s budget.

And unfortunately, unlike Obama, Detroit can’t just print its own money. And even if it could, no one would take it.

The city also has $5.7 billion in unfunded retiree benefit obligations, more than previous estimates, the report found. To catch up on pension and health benefits to retirees, the city would need to spend $339 million, about a third of its fiscal 2013 revenues, Orr estimated.

All told, Detroit has liabilities totaling $9.4 billion in debts from special revenue bonds, revolving loans, pension obligations and other financial instruments.

So time to raise taxes on the rich? Right?

These large deficits are not for lack of taxes. According to a report released by the Office of Revenue Analysis of the Government of Washington, D.C., of the largest cities in each of the country’s 50 states, Detroit has the ninth-highest taxes.

Unfortunately while Detroit does have high taxes, only the rich pay them.

The News reviewed more than 200,000 pages of tax documents and found that 47  percent of the city’s taxable parcels are delinquent on their 2011 bills.

Delinquency is so pervasive that 77 blocks had only one owner who paid taxes  last year.

Detroit relies on a shrinking sliver of businesses and neighborhoods  to pay the bulk of the bills. The three casinos, General Motors Corp., DTE  Energy, Chrysler Group LLC and Marathon Petroleum Corp. paid 19 percent of  collected property taxes. Five city neighborhoods, most of them downtown and  along the river, paid 15 percent of the city’s taxes and represent only 2  percent of the city’s total parcels. In all, only 41 percent of the city’s  parcels produced tax revenues last year because of delinquencies and a large  number of tax-exempt land

That means Detroit can’t afford much more flight, because the escapees are the remaining tax base. If GM and Chrysler had gone down, Detroit would have lost a huge chunk of its revenues. If a few stable neighborhoods empty out, the ripple effect would destroy Detroit.

Detroit is not salvageable with a population and government solution. Its government is too big for a population that is fleeing the city. Too much of its population does not work or does not pay taxes, but uses taxpayer services. This isn’t sustainable in the city. Or in the country.

  • Rodney

    It is crazy to me how a city can spend money like this and people not see what that leads too . on a small
    scale this is where the liberals are taking us all. This is what low information voters bring .

    • ron

      Look at the demographic makeup of detroit and then you'll understand. Sorry to ruffle feathers, but this is a pretty consistent aspect of broken cities in the US.

      • Larry S

        broken families => broken cities

  • Nick Gherz

    The receivers outnumber the providers.
    No – it's not sustainable, but there could be "unrest" if it isn't bailed out by government largess.

  • citizen_rhetor

    Who is John Galt?

  • AlgerHiss

    If everyone would only ride Detroit's People Mover, all would be fine.

    The notorious punk/thug Mayor Coleman Young must be smiling.

  • onecornpone

    WHO has been running Detroit for half a century?

    Look at the photos… THIS is YOU, Houston, Texas!

    • http://www.youtube.com/watch?v=nLNn2YflwNs Roger

      Socialism never ends well.

    • WTE

      What's your point, Racist?

      • onecornpone

        … Racist?

        Nope, Unless Democrat is a RACE

  • Spikey1

    Lets say for a moment that Detroit has a population of 700,000 people (about anyway). If we take the total debt and divide it by the population we end up with $13,428.57 which is the number every; man, woman, and child should just write a check to the city of Detroit for.
    This $13428.57 is also the number that every; man, woman and child should have to pay to their "new"; city, village or town when they move into it, for the people of Detroit are actually the problem, and those problems are sure to follow them to their next city. Lets simply require that their problems are offset up front.

  • WilliamJamesWard

    When you have a population that votes for feebies the end is down the road as more move into
    the freebie zone. This is the story of America and to a large extent gave us Obama. The electorate
    votes in people with no management skills and soon enough there is disorder, ineptitude and
    a crushing tax burder in the making. Any City or State that does not operate on a balanced
    budget principle will join Detroit in bankruptcy, moral bankruptch first then all goes down hill.
    William

  • Chris

    Detroit is obama's blueprint for a "transformed America"
    Detroit is a progressive dream come true.
    The liberal democrats who did this to Detroit got rich though.
    Coleman Young = Barack Obama