Bing’s bankruptcy option

City of Detroit

Detroit Mayor Dave Bing deserves our heartfelt sympathy. He shouldn’t be blamed for the problems he inherited. Yet he is utterly incapable of fixing the financial chaos. His third State of the City address made that clear.

But if Bing can’t – or won’t — make the tough decisions to rescue the city from its worst economic predicament ever, he should throw in the towel and admit that his administration is over its head in a hopeless cause. That would hasten evitable bankruptcy as the last best option.

His speech the othe night gave no hint that Detroit is blazing new ground  toward a fundamental change in the city’s operations. The absence of a reoganization or downsizing was an ominus sign that Detroit isn’t close to curing its out-of-control spending addiction.

The bulk of anticipated saving comes from his ability to squeeze out a few employee benefit concessions. But it doesn’t take a rocket scientist to figure out that the meager amount he might wrestle from the unions wasn’t going to make a dent in the shortfall.

Detroit has become the reluctant landlord of probably half of its total land area as buildings and vacant lots revert to city/county control because of unpaid taxes and abandonment. The rate of abandonment is so rapidly, the city may not know the actual number of parcels within it borders.

It makes no sense that the city’s primary redevelopment strategy is to sell vacant lots for $200, which gets them back on the tax rolls. But more than anything, the city’s foray into selling real estate suggests the only viable housing market is the vacant lots on which they formerly stood.

The bleak crime forecast more than justifies staffing police and fire personnel based not on budget consideration, but on the public safety needs of the city. But there was nothing of substance about how Bing intends to tackle the city’s explosive dilemmas of violence and drugs. More cops and firefighters seem out of the question.

So are tax hikes. Detroit is well above the level of taxation of most Michigan cities. The city is also at the maximum levy permitted by state law for property and income taxes. No help there.

Although the financial flexibility of the city is more limited than ever, nothing is on the table to deal with the relentlessly shrinking revenue base and mounting debt in the city.

The city’s junk bond status doesn’t allow for floating deficit reduction bonds. With widespread abandonment and property values in free-fall, the city can’t effectively calculate how to repay tax anticipation notes (TANs). To even go down this road would mean that Bing again wants to eliminate his budget shortfall by restructuring – papering over — current debt obligations – rather than restructuring the city’s service portfolio.

Don’t expect the state of Michigan to appoint an emergency manager. If the state remotely thought that was a good idea it would have happened by now. State intervention at this level would suggest it felt that the city is salvageable. It speaks volumes that Gov. Rick Snyder is hands-on with some struggling cities and hands-off Detroit.

The bottom line is that either under an emergency manager or a consent decree, the city continues to hemmorage tax base. Working people who  don’t feel safe and comfortable living in the city are leaving in droves, or just staying away. New business entrants receive long-term tax breaks.

Politicians like to tell people what they want to hear, and what Detroiters want to hear is what won’t happen; that a roadmap has been drawn for the city’s recovery.

Thus, Mayor Bing should concede that he doesn’t have a coherent revival agenda. He should stop trying to make Detroiters feel good about his weak efforts to provide a brighter future. And he should concede there isn’t enough reason or prudence in City Hall to prevent municipal bankruptcy from ultimately becoming the next best restructuring option.

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