Detroit Poised for Hostile Takeover by State of Michigan; What Needs to Be Done to Fix Detroit

Detroit Mayor Dave Bing is upset about a possible takeover by the state. Bing says "We know what needs to be done, and we stand ready to do it."

I have a simple suggestion for Bing don't "stand ready to do it, just do it". Indeed he has had years to "just do it" yet hasn't done it.

Please consider Detroit in a hostile takeover bid?

The idea is extreme, even in a city accustomed to fighting for survival: Should the state of Michigan step in to run Detroit?

The governor has taken steps in that direction, proposing an unprecedented move that could give an appointed manager virtually unchecked power to gut union contracts, cut employee health insurance and slash services. But city leaders bristle at the notion. Said the mayor: "This is our city. Detroit needs to be run by Detroiters."

If it happens, Detroit would be the largest American city ever taken over by a state. Michigan has seized control of smaller struggling cities, but until now Detroit was always off-limits.

That changed this week, when Republican Gov. Rick Snyder's administration said it would begin a review of Detroit's precarious finances. If the governor concludes that the city's economic situation constitutes an emergency, he could dispatch a manager who could push the mayor and city council to the sidelines.

Democratic Mayor Dave Bing says Detroit doesn't need the help. He insists the city is reducing a $150 million budget deficit and easing cash-flow problems on its own.

"We know what needs to be done, and we stand ready to do it," an indignant Bing said.

"It terms of a city, I think Detroit stands alone," said Michael LaFaive, director of fiscal policy at Michigan's Mackinac Center for Public Policy, a nonpartisan group that espouses free markets.

An emergency financial manager would have the power to privatize utility departments, as well as the bus system and other agencies. A manager also could sell off city-owned parking lots and even Belle Isle, Detroit's popular island park, LaFaive said.

In a 2001 report, LaFaive wrote about Detroit's burgeoning fiscal problems and recommended privatization, contracting out services and ways to generate revenue.

"I think they knew what the recommendations were, but their hands were tied a bit by recalcitrant employee unions," LaFaive said. "Those kinds of bold reforms would be difficult to get over with the city council or voters, in general."

Last month, Bing declared the city government "broken" and said the public's checkbook would be short by $45 million next year unless Detroit starts saving money fast. In an attempt to ward off an emergency manager, he proposed laying off 1,000 employees — 9 percent of the workforce — and negotiating 10 percent pay cuts with unions.

Bing Hasn't Done It Because He Can't

Union rules and contracts prevent Bing from doing what needs to be done. Moreover, I doubt he would do it even if he could.

Last month Bing declared city government "broken".

Sheeesh. Detroit has been broken and bankrupt for years, decades probably, but certainly for the entire time Bing has been mayor.

I have written about Detroit on many occasions.

June 12, 2009: Median Home Prices In Detroit Fall To $6,000

Although I am a deflationist, I must admit surprise that the median home price in Detroit has fallen to a stunningly low $6,000.

July 11, 2009: Detroit Public School System Ponders Bankruptcy

Freep is reporting the Detroit Public School System May Wind Up In Bankruptcy.

July 24, 2009: 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.

April 6, 2010: Detroit Bankruptcy Looms with Deficit of $446 Million in Budget of $1.6 Billion

Detroit has hit the end of the line. It's budget deficit is between $446 million and $466 million (28% to 29%) of $1.6 billion with few ways other than drastic cuts in wages and benefits to address the problem. If unions will not give in (and they won't), Detroit Faces Bankruptcy.

December 13, 2010: Detroit Mayor Plans to Halt Garbage Pickup, Police Patrols in 20% of City

Detroit has been bankrupt for years. It simply refuses to admit it. Detroit's schools are bankrupt as well. A mere 25% of students graduate from high school.

Yet, in spite of hints and threats from mayors and budget commissions, and in spite of common sense talk of bankruptcy, Detroit has not pulled the bankruptcy trigger.

In a futile attempt to stave off the inevitable one last time, Mayor Bing's latest plan is to cutoff city services including road repairs, police patrols, street lights, and garbage collection in 20% of Detroit.

Bing to Cede 20% of Detroit to Gangs and Homeless

City officials suggest this will not shrink the size of the city. Perhaps it won't shrink Detroit on Google Maps. However, Bing's plan would effectively surrender 20% of the city to gangs and the homeless.

Would you want to live in one of the gang war-zones that his plan would create? Would you want to live in a bordering neighborhood or in a bordering city?

Regardless of your answer, Bing's plan cannot and will not work and I believe Detroit will, sometime in 2011, file for bankruptcy.

Repurpose or Abandon?

Of course the Mayor's office did not say they would abandon sections of the city to gangs. But how the hell can repurposing as described above possibly mean anything else?

What's next? Barbed wire? Oh wait a minute, Detroit already has tried that. Razor-wire too. Here's a picture of Detroit's clearly abandoned repurposed Michigan Central Train Depot.



Image courtesy of the Journal and the AP.

November 16, 2011: Detroit May Run Out of Cash Next Month, Unable to Meet Payroll, Situation Worse than Reported

Michigan Live reports Detroit could run out of cash in December, plan must include layoffs

Enough Already!

Will someone, anyone please put Detroit out of its misery. Bing cannot do it. Only a complete overhaul stands a chance.

What Needs to Be Done

• Privatize  all city services
• Outsource the entire police department to the local sheriff's association
• Void all union contracts
• Renegotiate union pensions
• Establish charter schools
• Merit raises for teachers
• Fire Bing and his entire staff

It will take a hostile takeover and very tough positioning by Republican Governor Rick Snyder. He has the votes. Does he have the political courage?

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