Detroit Heads For Bankruptcy; 50 Cities Must "Shrink to Survive"

For Detroit, as with GM, bankruptcy has always been a question of when, not if. Detroit's time is nearly up even as Mayor Dave Bing says I’m fighting to keep city from going broke.

Detroit is in danger of running out of cash if the city doesn’t take steps to eliminate a $20-million to $25-million budget shortfall before Oct. 1, Mayor Dave Bing told the Free Press on Thursday.

After spending most of his first two months in office poring over Detroit’s financial books and organizational structure, Bing said the city is so deeply in the red that the following measures must be taken to avoid bankruptcy:

• The consolidation and elimination of some city departments.

• A reduction in nonessential city services.

• Concessions by city employees, including job losses in some cases.

• The hiring of an outside emergency collection agency to help recoup some of the debt owed to the city.

Bing said the city cannot afford to continue operating the way it has for generations, nor can it afford to keep all of its 13,000 employees.

Bing said Thursday there are no more creative moves to make -- those budgetary tricks were all tapped by previous administrations -- and the city is up against a wall financially. The only answer, he said, is to change how the city functions.

To start, he said, these are his priorities:

• Bing said city workers must accept some concessions, and end contract negotiations within the next 30 days. "Every day that we go forward without understanding what our labor costs are is a missed opportunity. ... There are financial consequences for the city," he said.

• Reach out to Lansing legislators for ideas and help in tackling the city's accumulated debt, especially as it relates to revenue sharing.

• Determine which city services can be cut or eliminated all together. Bing said he has some ideas, but he couldn't be more specific because of the ongoing labor negotiations. "There are going to be services we can't provide anymore -- we can't afford it," he said.

....

The mayor said this year's budget is padded with soft or unrealistic revenue, including money from plans to sell the rights to the profit generated by the city's parking system, lighting system and the Detroit-Windsor Tunnel.

John Riehl, president of AFSCME Local 207, which represents water and sewer employees, said Bing's plans to consolidate or eliminate city departments is "just a way to mess with the unions," and said he's certain city residents won't tolerate having more city services cut.

"It's not our role to give anymore concessions -- we've heard the same crying for 30 years that they don't have money for us," Riehl said. "He needs to find another way to solve the budget problem."

Bing said he views municipal bankruptcy -- Chapter 9 -- as a last option. "Right now I'm still pretty competitive," Bing said. "I don't want to get into this situation and fail. We're going to get the job done."

[Note: The original link above was broken. Freep also changed the headline from "Bing: I’m fighting to keep city from going broke" to "Bing: It's time for the city to face reality". The text above may have changed.]

Selling long-term cash producing operations like the Detroit-Windsor Tunnel (connecting the US to Canada) to finance short-term operations is pure insanity.

The city is broke and the unions have not even figured that out. Many people would gladly take those jobs at a lower salary and no pension benefits.

US cities may have to be bulldozed in order to survive

Inquiring minds are reading how 50 US cities may have to be bulldozed in order to survive.

The government looking at expanding a pioneering scheme in Flint, one of the poorest US cities, which involves razing entire districts and returning the land to nature.

Local politicians believe the city must contract by as much as 40 per cent, concentrating the dwindling population and local services into a more viable area.

The radical experiment is the brainchild of Dan Kildee, treasurer of Genesee County, which includes Flint.

Having outlined his strategy to Barack Obama during the election campaign, Mr Kildee has now been approached by the US government and a group of charities who want him to apply what he has learnt to the rest of the country.

Mr Kildee said he will concentrate on 50 cities, identified in a recent study by the Brookings Institution, an influential Washington think-tank, as potentially needing to shrink substantially to cope with their declining fortunes.

Most are former industrial cities in the "rust belt" of America's Mid-West and North East. They include Detroit, Philadelphia, Pittsburgh, Baltimore and Memphis.

In Detroit, shattered by the woes of the US car industry, there are already plans to split it into a collection of small urban centres separated from each other by countryside.

"The real question is not whether these cities shrink – we're all shrinking – but whether we let it happen in a destructive or sustainable way," said Mr Kildee. "Decline is a fact of life in Flint. Resisting it is like resisting gravity."

Shrink To Survive

Inhabit is reporting on the same story in Shrink to Survive. Here are a couple of images.

The Obama administration is reportedly considering plans to raze sections of 50 economically depressed US cities, condensing these towns’ shrinking populations and city services to smaller areas. The plan, dubbed “shrink to survive,” may seem kooky, but it could be big news for environmentalists: In many cases, bulldozed districts would be returned to nature via forests or meadows.



The plan is modeled after a proposal currently underway in Flint, Michigan, the original home of General Motors.

Sections of Detroit, Flint, and 50 other cities sit in ruins. Let the bulldozing, the bankruptcies, and the tossing out of unions begin.

I am glad AFSCME Local 207 is taking a "no concessions" stance. This will allow Bing to do the number one thing that will benefit Detroit the most: Declare bankruptcy and hopefully get a court to eliminate the unions entirely.

The sooner Detroit files bankruptcy, the better off it will be. For the sake of Detroit, let's hope it happens this autumn.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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