Detroit, symbol of US industrial might, goes bankrupt

[mkrishna100]

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Detroit, symbol of US industrial might, goes bankrupt
http://www.thehindu.com/news/international/world/detroit-symbol-of-us-industrial-might-goes-bankrupt/article4930878.ece?homepage=true

 

[sangom]

Detroit, symbol of US industrial might, goes bankrupt
http://www.thehindu.com/news/international/world/detroit-symbol-of-us-industrial-might-goes-bankrupt/article4930878.ece?homepage=true

It looks as though there is a deep, undelying racial cause to this.

 

[prasad1]

What does it mean when a city files for bankruptcy?


Assuming the case goes forward — some creditors may try to object to the filing — the court will now determine which entities — corporations, pension funds, employees and anyone else Detroit owes money to — will actually see the money they were promised by the city.


According to the American Bankruptcy Institute Journal, Detroit technically gets to do all of the proposing for how that works out. It will submit a restructuring plan to the court, and if the plan doesn't violate any sections of the federal bankruptcy code, it will be voted on by the creditors.


The creditors don't get to propose their own plan, and the court can issue a "cram down" order to force objecting creditors to accept parts of the plan.


But there will be negotiations going along the whole way where creditors will have their say.
Municipal Bankruptcies Explained - Business Insider
Detroit is on the mend.


Here's the summary:


In several major economic indicators, Detroit's rate of improvement has matched or exceeded the national average.
Former Mayor Kwame Kilpatrick aside, the city enjoys strong leadership.
The auto industry is booming.
Its sports teams remain hugely successful.
It's also becoming an increasingly popular center, for a new wave of entrepreneurs.

Filing for bankruptcy is not death of the city.

 

[kunjuppu]

i tend to agree with prasad re filing for bankruptcy is not the end of the city.

my take? there is so much corruption, that all tax income is swindled by the politicians and the city workers. so not much money left to pay for the vendors for services rendered or products purchased.

add to it, i would suspect, that there is a hefty pension bill. in canada, the lower the level of govt, higher the salary and more generous the benefit. ie a toronto city worker is better paid that the ontario provincial worker who is better paid than the federal govt worker. and all of them have generous pensions and medical benefits.

when a city's tax base shrinks, it gets less money through corporate and property taxes. so it cannot afford the heavy load of pensions, of people who retired sometimes at 50 or 55, and live upto 90. also many retirees, come back and thanks to their contacts, work as consultants, earning an even bigger salary, and 'double dipping' from the same pot. in addition denying jobs to youngsters.

corruption, is everywhere. how much it impacts the common man? in usa or canada, hardly? in some other countries it cripples the common man. what to do?

so, with banktruptcy the city can change rules - ie dont pay old bills and modify pension rules. i think this is gradually being done. the new method of pension, is like in india ie defined contribution - you put some in the pot, and the company does the same. when you quit working, this money, ie your savings, if it has multiplied enough, is sufficient to take care of you in old age. otherwise, you will be in the streets, or at the mercy of your children. yes, old people in canada (and usa too i would guess), there are instances of parents not having enough to eat, because of poverty

 

[sangom]

i tend to agree with prasad re filing for bankruptcy is not the end of the city.

my take? there is so much corruption, that all tax income is swindled by the politicians and the city workers. so not much money left to pay for the vendors for services rendered or products purchased.

add to it, i would suspect, that there is a hefty pension bill. in canada, the lower the level of govt, higher the salary and more generous the benefit. ie a toronto city worker is better paid that the ontario provincial worker who is better paid than the federal govt worker. and all of them have generous pensions and medical benefits.

when a city's tax base shrinks, it gets less money through corporate and property taxes. so it cannot afford the heavy load of pensions, of people who retired sometimes at 50 or 55, and live upto 90. also many retirees, come back and thanks to their contacts, work as consultants, earning an even bigger salary, and 'double dipping' from the same pot. in addition denying jobs to youngsters.

corruption, is everywhere. how much it impacts the common man? in usa or canada, hardly? in some other countries it cripples the common man. what to do?

so, with banktruptcy the city can change rules - ie dont pay old bills and modify pension rules. i think this is gradually being done. the new method of pension, is like in india ie defined contribution - you put some in the pot, and the company does the same. when you quit working, this money, ie your savings, if it has multiplied enough, is sufficient to take care of you in old age. otherwise, you will be in the streets, or at the mercy of your children. yes, old people in canada (and usa too i would guess), there are instances of parents not having enough to eat, because of poverty

Shri Kunjuppu,

Your post is not clear. Do you mean to include US, Canada etc., under your umbrella statement that,

"my take? there is so much corruption, that all tax income is swindled by the politicians and the city workers. so not much money left to pay for the vendors for services rendered or products purchased."

But you effectively rule this out saying,
"corruption, is everywhere. how much it impacts the common man? in usa or canada, hardly? in some other countries it cripples the common man. what to do?"

So, do you or do you not attribute corruption in the matter of Detroit bankcruptcy?

 

[prasad1]

I do agree with the statement that corruption is everywhere, but degree varies. No body has come forward to say that exchequer was looted, or the tax dollars went into personal account of city officers.
Is it corruption, or more like mismanagement?
The tax base and revenue have shrunk, but the expenses have increased as city has to take care of additional crime, and Vandalism.
So the city is not able to pay its bills. In USA city has to manage its own finance, it can not expect to bailed out.

 

[prasad1]

• Detroit's population fell more than 26% from 2000 to 2012 and totals about 700,000—down from almost two million in 1950, according to the census.
• An estimated 40,000 structures or land parcels sit vacant or empty.
• The city spent $100 million more than it took in every year since 2008, on average—borrowing the rest.
• Some 36% of Detroiters lived below the poverty level between 2007 and 2011, the census found.
• In 2012, Detroit had the highest violent crime rate for a city with more than 200,000 residents, the FBI says.

 

[mkrishna100]

Following is the link to the article on Detroit on NYT and some selected comments of the same I have shared here written by people who have lived in Detroit /USA

Billions in Debt, Detroit Tumbles Into Insolvency
http://www.nytimes.com/2013/07/19/us/detroit-files-for-bankruptcy.html?ref=us

Selected comments :

I know Detroit and its politics like the back of my hand, having been born there in 1948 and having left in 1998, In the 1970s, Coleman Young, a State Senator who couldn't afford to buy his own coffee, was elected Mayor and promptly advised white Detroit to "...hit 8 Mile Road." (The northern border of the city.) He installed his cronies, was Mayor for 20 years, and retired a multi-multi millionaire after living on a salary $110K/year, with gold Krugerrands in his safety deposit box. He was a strong union supporter and his largesse made city employment, retiring at 60% of gross after 20 years, today's lottery ticket. (The ticket is now dischargeable in bankruptcy.) White Detroit took his advice. Black Detroit has been paying the piper. 40 years of corruption, over-spending, installation of more corrupt, and, frankly, incompetent financial managers and successors, and we have a bankruptcy filing. The streetlights haven't worked for 20 years. High schools don't have libraries, gyms or books, or, for that matter, graduating classes. Neighborhoods resemble Beirut. There is no residential tax base. This is, according to Mr. Obama, one of our premier cities? Facts are stubborn things. They are not black or white or subject to dispute. And some of those who have written before me blame corporate racism. I sit here in the mountains of South Carolina and shake my head. You deserve each other. My heart aches for those city residents who paid for, expected, and deserved, much better.

--------------
We just have to use our common sense. There is absolutely a link of corruption between public sector unions and politicians (almost exclusively Democratic ones). In exchange for very generous benefits and pensions (of course, paid for by the taxpaying public), the public sector unions support the campaigns of Democratic politicians. When it's time to renew the union contracts, there is no one at the table representing the taxpayers. The union bosses say "we want more!" and the politicians say "certainly!" This is why for most of the history of our country public sector unions were prohibited by law. We have thousands upon thousands of public sector workers who can retire in their mid-50s with pensions in the 6 figures, plus full medical, dental, and vision insurance for life (in addition to their spouses). This does not take a Ph.D. in economics to figure out. The system is going to collapse!

------------------

90% of the comments here attribute Detroit's decline to politics. Nonsense.

Detroit used to have a vibrant auto industry. It was basically a one-pony town. Over time, automobiles became a commodity that anyone in any country could make, as happens for almost every industry: steel, electronics, computers, and yes autos. Detroit employed high school graduates, the good jobs today require more education. Detroit is a victim of its own earlier success.

Unions, political affiliation, moral values -- none of this had anything to do with it. Things change. Industries mature and then become old. The only way a country stays wealthy is to re-invent. If you want communities to stay viable, invest in the future.

It has been a long road to the present state of affairs. Post-WWII, Detroit was a segregated city with a white majority and a large minority of African Americans who migrated from the South to work in auto plants. The city was surrounded by large tracts of undeveloped suburban land. Instead of investing in mass transit, the auto companies supported the building of several freeways leading to the suburbs. As the African American population grew, whites used their cars to travel these freeways to their newly built suburban homes. Businesses soon followed and the decline continued until African Americans were left with a city they could not afford to run. Yes there have been scoundrels, namely the currently incarcerated ex-mayor Kwame Kilpatrick. But understand there has been collusion on the part of powerful white interests who have received favors in contracts and influence and tax breaks. Auto industry jobs were outsourced. No one has clean hands. Enter the recently elected Governor Rick Snyder, who made it his mission to suspend democracy in every majority African American city in Michigan by passing an emergency manager law. Well funded Republicans from Western Michigan form Snyder's donor base and he is doing their bidding. They want to get control of Detroit's assets, namely land on the riverfront and a new bridge to Canada. The hell with democracy. It's inconvenient and African Americans don't need the vote.

 

[kunjuppu]

Shri Kunjuppu,

Your post is not clear. Do you mean to include US, Canada etc., under your umbrella statement that,

"my take? there is so much corruption, that all tax income is swindled by the politicians and the city workers. so not much money left to pay for the vendors for services rendered or products purchased."

But you effectively rule this out saying,
"corruption, is everywhere. how much it impacts the common man? in usa or canada, hardly? in some other countries it cripples the common man. what to do?"

So, do you or do you not attribute corruption in the matter of Detroit bankcruptcy?

dear sangom,

post #8 details the corruption in detroit and its effects.

in canada, by and large, english speaking towns and cities are comparatively free of corruption. quebec, i would say, is rife with it, with the mayors of montreal or quebec city, having close ties to mafia, and getting kickbacks for govt contracts. much like india.

except, the common guy in the street, is not impacted, except ofcourse an increased property tax, part of which pays for corruption.

nothing like what is india, where corruption paralyzes the country at large, and breaks the back of the poor. the benchmark is high, and newspapers are vigilant, and the electorate on the whole, will not re elect someone convicted. as a rule, that is, but always there are exceptions, i guess.

btw, the suburbs of detroit are awesomely beautiful, well laid out, good schools and great public facilities. not surprisingly, wholly populated by whites, indians and chinese. i have relatives living in west bloomfield, and i think, it is among the best designed houses i have seen. the occupants are doctors (!).

 

[vgane]

dear sangom,

post #8 details the corruption in detroit and its effects.

in canada, by and large, english speaking towns and cities are comparatively free of corruption. quebec, i would say, is rife with it, with the mayors of montreal or quebec city, having close ties to mafia, and getting kickbacks for govt contracts. much like india.

except, the common guy in the street, is not impacted, except ofcourse an increased property tax, part of which pays for corruption.

nothing like what is india, where corruption paralyzes the country at large, and breaks the back of the poor. the benchmark is high, and newspapers are vigilant, and the electorate on the whole, will not re elect someone convicted. as a rule, that is, but always there are exceptions, i guess.

btw, the suburbs of detroit are awesomely beautiful, well laid out, good schools and great public facilities. not surprisingly, wholly populated by whites, indians and chinese. i have relatives living in west bloomfield, and i think, it is among the best designed houses i have seen. the occupants are doctors (!).

I had been to Detroit in 2002 & was amazed & impressed by the auto power...Had personally visited a few companies there..Saddened by the developments in Detroit..May be Detroit did not innovate much and change with the times

 

[Anand Manohar]

Prasad Garu

Have you read of the story of the canoe race between Toyota & GM ?

I'll try-n-post it, story sounds dumb - turns out it was almost prophetic.

Yay Yem

 

[prasad1]

At a century-old Detroit fire station surrounded by boarded up storefronts and weed-choked lots, the Motor City's bankruptcy filing wasn't exactly a surprise. "Basically we're screwed," Dombrowski, 48, said as he stood watch over an isolated corner of the city where thousands of abandoned buildings regularly go up in flames.


The sweltering Engine 29 fire station encapsulates the city's troubled history of boom and bust.


Built in 1907 when Detroit was a hotbed of industrial innovation about to put the world on wheels, it now houses a rickety fire truck that has more than 100,000 miles (160,000 kilometers) on its odometer. Like many life-long Detroiters, Dombrowski blames the city's woes on decades of mismanagement, bad decisions and worse luck. As the population and tax base shrank, city services got worse and worse and the gulf between the city and the suburbs got wider and wider.

Motor City then saw its main employers go through round after round of mass layoffs as auto factories were automated or outsourced and Asian competitors siphoned away market share. Once the fourth largest US city, Detroit has seen its population shrink by more than half from 1.8 million in 1950 to 685,000 today.

 

[prasad1]

Time Indian cities woke up to municipal bonds

For instance, the finances of the Jaipur Municipal Corporation are in poor shape, the civic body mopping up only 40% to 50% of its annual revenue targets. A large chunk of its revenues goes in paying 8,000 employees. From Lucknow, to Raipur to Bangalore, the story is similar.


According to the report on Indian Urban Infrastructure and Services chaired by economist Isher Judge Ahluwalia, our urban local governments are among the world's weakest in terms of capacity to raise resources and financial autonomy . "While transfers from state governments and the Centre have increased, ULBs' (urban local bodies) tax bases have remained narrow, inflexible and lack buoyancy. They've failed to levy user charges for services to cover operations, maintenance and depreciation costs," the report says.