Tag Archives: Detroit Mayor Dave Bing

Detroit within months of bankruptcy

Over the past several weeks, Detroit Mayor Dave Bing has offered a stark picture of the city’s near-term prospects. By April the government will run out of money. The city faces a shortfall of $45 million, with an accumulated deficit of $180 million.

Detroit’s problems didn’t start yesterday. As The Economist writes the combination of falling property values, shrinking population, the rising cost of public services in a sprawling city, and the effects of the recession, “have provided the trigger for the crisis.”

Mayor Bing’s plan to shore up the city’s budget includes raising revenues with an increase in the C-corporation tax, and collection of past receivables, cutting spending by eliminating furloughs, a 10 percent pay reduction, 1000 layoffs, minor changes to retiree pensions, modified contributions to employee health plans, outsourcing the management of bus services, and a 10 percent reduction in vendor payments. These actions are estimated to save $258 million.

The wild card is what will happen to Detroit’s pension system. Without reform the city’s rising pension costs will continue to batter Detroit’s finances. The city’s pension and health care costs represent 13 percent of Detroit’s budget, or $218.5 annually. Unless Detroit’s 45 unions agree to structural changes, the Mayor warns, Detroit will be taken over by a state-appointed receiver according to Michigan’s emergency manager law.

Mayor Bing’s plan doesn’t have a great deal of support from the City Council with the rhetoric becoming increasingly charged against the Mayor and the notion of a state takeover of the city’s finances. But in order to avoid a takeover the Mayor and Council must come to an agreement. In the meantime, Moody’s is reassessing the city’s general obligation debt and sewer bonds ratings. Standard and Poor’s rates Detroit’s long-term general obligation debt BB, with a stable outlook.



In Miami, Detroit, and San Jose Unions Face Pay Cuts

NPR reports that cities and states are making significant cuts to public sector salaries in order to balance their books. To close Miami’s $105 million deficit, public employee benefits and salaries were slahsed by $80 million. They had little choice. City Commissioner Suarez notes without the cut employee costs would have been 101 percent of the total budget. Detroit’s Mayor Dave Bing is cutting salaries and benefits by 10 percent. (The culmination of a year-long standoff with AFSCME to cut wages)

Battling Bankruptcy in America’s Cities

Business Insider ranks America’s most bankrupt cities. Many in the list of 16 are wrestling with the same problems including unions that refuse to concede on salaries and benefits.

Detroit Mayor Dave Bing is showing particular resolve in trying to close the city’s $325 million deficit. He is pushing to reolcate residents from sparsely populated neighborhoods to shrink the city’s footprint. And he may privatize some city services. Last month he accused AFSCM, the city’s largest union, for stalling on contract negotiations, “Either they can’t read, they can’t add, or they can’t comprehend.” Mayor Bing would also like to transfer control of the city’s pension system to a non-profit.

Other cities making the list include Las Vegas, Los Angeles, Chicago and New York City.