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Detroit is getting an “emergency manager”

This is startling news considering that much of the news out of Detroit has been good lately.

I spoke with several people deeply involved in counselling the governor on Detroit, and none doubted that his next move is an emergency manager. Managing the restructuring of the city’s $12 billion of debt and pension liabilities is too complex to be handled through the political process.

There’s also a rumor that more bad news is coming on the pension shortfall that will make erasing the deficit even more difficult.

Pieces are falling into place quickly. The Financial Advisory Board will get an update Monday on the work of the three consulting firms hired to handle the restructuring.

Teams from Conway MacKenzie of Birmingham are embedded in all city departments and are finding broken systems — and savings — in every single one. The advisory board and Ernst & Young are digging deep into the budgets of each department in an attempt to match spending to revenue.

The goal is to achieve positive cash flow for the first half of the year. By then, the restructuring blueprint being worked up by New York-based Miller-Buckfire & Co will be ready. It will either be used to take the city into bankruptcy or handed to the emergency manager.

Which one implements the turnaround depends on how cooperative Detroit’s creditors are in shaving the debt. If the manger can convince them to take a significant haircut, the city may avoid bankruptcy.

3 Comments

  1. Phil Hull says:

    Oh where to begin about this mess. Since I live here I know as well as any how bad things are. Fixing Detroit’s problems would have been much more manageable 10 years ago, but sadly the city was saddled with Kwame Kilpatrick as its mayor and the stunning incompetence and corruption that came with his administration.
    The current situation can be simply broken down into three malfunctioning parts. 1) Detroit mayor Dave Bing. 2) The group of simple minded school children known as the Detroit City Council. And 3) the robber barons also known as the Republicans in East Lansing. Bing was elected mayor pretty easily due to his success as an NBA Hall of Famer and local businessman, but he has quickly blown any good will he may have had by trying to strong arm the entire city government from his first day in office. The city council are a bunch of petulant children that are more concerned with making Bing look bad than fixing the city. They refuse to acknowledge the dire circumstances the city is facing or attempt to find real solutions to the city’s problems.
    They are small potatoes, though, compared to the knuckle draggers currently running our state government. If Detroit is put under the control of an E.M., more than half of the African-Americans in the state of Michigan will basically have the votes they cast for their elected leaders erased and replaced by a state appointee that has near total control of the city. The GOP here has done more in the last two years to take the legs out of any group that opposes them since Tammany Hall. It’s an outrage, but they have control of the governor’s office, the House and Senate, the Supreme Court, and pretty much every other elective office so there’s not much anyone can do until we get to vote the bums out next year. The damage that can be done in the meantime is too big to fathom. City services in Detroit are already worse than what you’d find in Somalia, I can’t imagine how bad things will be after an emergency manager takes a hatchet to the already bleeding corpse that is the Detroit city budget.

  2. Jordon says:

    Phil, that may have been my favorite comment ever on here. We need more Tammany Hall references.

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