Detriot files for bankruptcy.

[Scout26]

http://online.wsj.com/article/SB10001424127887323993804578614144173709204.html?mod=WSJ_hpp_LEFTTopStories

This should be fun to watch.  Unless Obama steps in, the way it works is secured creditors get first dibs, and any unsecured creditors get whatever is left over.  And the unsecured creditors ($11 of the $20 billion the city owes) is mostly retiree healthcare, benefits, and pensions.

 

[Tallpine]

So does this mean it reverts back to unincorporated county 

[drewtam]

So does this mean it reverts back to unincorporated county 

No, it just officially says they will never pay the debts that are owed.

http://online.wsj.com/article/SB10001424127887323993804578614144173709204.html?mod=WSJ_hpp_LEFTTopStories

This should be fun to watch.  Unless Obama steps in, the way it works is secured creditors get first dibs, and any unsecured creditors get whatever is left over.  And the unsecured creditors ($11 of the $20 billion the city owes) is mostly retiree healthcare, benefits, and pensions.

 

The deal that the pension and union advocates rejected was a drastic cut in promised pay; bankruptcy is worse. But remember GM? Yeah bondholders got screwed, pensions got paid.

My money is that the pension and union advocates rejected the first offer because they got expectations on being able to affect the bankruptcy outcome.

[Tallpine]

No, it just officially says they will never pay the debts that are owed.

They need to liquidate all the city assets: jails, courthouses, police cars, etc 

[roo_ster]

No, it just officially says they will never pay the debts that are owed.

The deal that the pension and union advocates rejected was a drastic cut in promised pay; bankruptcy is worse. But remember GM? Yeah bondholders got screwed, pensions got paid.

My money is that the pension and union advocates rejected the first offer because they got expectations on being able to affect the bankruptcy outcome.

Other municipalities will love them for jacking the muni bond interest rates through the roof to account for such shenanigans.

[Scout26]

IIRC, the three largest SECURED creditors are the ones that shape the bankruptcy.  Unsecured creditors are lucky if they get a pittance when all is said and done.

[makattak]

IIRC, the three largest SECURED creditors are the ones that shape the bankruptcy.  Unsecured creditors are lucky if they get a pittance when all is said and done.

Unless the government steps in and usurps the law.

Of course, that would never happen in this country. We live in a country of laws, not men!... 

[vaskidmark]

They need to liquidate all the city assets: jails, courthouses, police cars, etc 

The guy in charge of trying to get through the bankruptcy has already said more than 2/3 of the Detroit Art Gallery (the stuff bought by the city, as opposed to loaned by fat cats) is going on the auction block.  There is supposed to be some quiet wrangling over stuff "donated" - because some had conditions & some did not.

I'm thining a Mattise for aound $25.00 might look nice on the man-cave wall.

stay safe.

[HankB]

Who is going to loan ANYTHING to Detroit in the future, or sell them ANYTHING without cash in advance - or for smaller items (e.g., gas for their vehicles, office supplies) on delivery?

I wouldn't.

[vaskidmark]

http://www.youtube.com/watch?v=l4ZQooPHHAA

How soon before the "Pure Michigan" tourism campaign shuts this down?

stay safe.

[Scout26]

There are quite a few on www.notsopuremichigan.com.  And they haven't shut him down yet.

[Perd Hapley]

Overhead on the radio (originally from the Twitterverse):

"If Obama had a city, it would look like Detroit."

[AZRedhawk44]

Strikes me as inappropriate for a government entity to declare bankruptcy.

Bankruptcy is a business process wherein a faulty market concept (bad business idea) is eliminated in a way that creditors get compensated.

Governments are not going to stop being governments and step aside in favor of "something else."  At least, not without lots of angry people with guns, tar, feathers and pitchforks.  I don't think I've ever heard of a city dis-incorporating once it is already incorporated.


The best that Detroit should be allowed to do, is stop future expenditures.  No pensions for new hires.  Eliminate the programs that exceed the budget.  Liquidate assets to offset insufficient income.  They aren't looking to exit the business of "government."  They're just looking for an excuse to stop paying people, get out of debt, then start the exact same damned thing over again with a clean ledger.

"Detroit" isn't going to go anywhere.  The land will always be there.  Some population will always be there.  If Detroit loses so much population density that it can't pay for the pensions of all the folks it used to hire... it'll go into debt for the next 25 years to pay those off.  And it won't offer pensions to new hires.  And it will sell its art museum and paintings.  And it will lean down its operating costs.  Until the monkey is off its back.

The lifespan of a city is measured in millenia... not years.  30 years of indebtedness is regularly accepted by lay folks who want to buy a home.  Detroit will exist for centuries to come.  Paying off this 30 year income lapse is comparable in its lifespan to me not having ready cash to buy a new tire for my truck when I get a flat, and whipping out the credit card instead.  I'll pay the tire off over the next month or two.

It might take Detroit 50 years to emerge from this debt.

But shrugging the debt elsewhere just increases the "privatize gain, subsidize loss" mentality that is sweeping the nation for the last decade or two.  

All those pensioners would end up getting something from FedGov, which comes out of the whole country's pocket, and everything keeps on as it was.  None of those politicians or city managers or bureaucrats will be held accountable for a solution to the problem, and the problem will keep happening since the "solution" is to distribute the debt wider and wider.  Until the number of small debts is so numerous that it is insurmountable.


Synopsis:  If there's no dis-incorporation, then no bankruptcy should be allowed.  Let people decide if they even WANT to be part of "Detroit."

[brimic]

The best that Detroit should be allowed to do, is stop future expenditures.  No pensions for new hires.  Eliminate the programs that exceed the budget.  Liquidate assets to offset insufficient income.  They aren't looking to exit the business of "government."  They're just looking for an excuse to stop paying people, get out of debt, then start the exact same damned thing over again with a clean ledger.

 

So an entirely irresponsible government is going to become responsible?

[AZRedhawk44]

So an entirely irresponsible government is going to become responsible?

I know... but ultimately the creditors will simply stop lending money until debts are paid off, meaning services HAVE to be cut since Detroit is incapable of printing money.


Otherwise... I think the slave-tax-chattel relationship of every city block of what is currently called "Detroit" needs to be shattered and people left free to re-incorporate however they want.  Or not re-incorporate.  Who knows, you might end up with Fordtown, MI.  Similar to how DisneyWorld is incorporated into its own municipality under a single land owner.  You'd break up the gerrymandered legislative monopolies that way and reshape politics, but the thing called "Detroit" would experience a massive reshaping.

[drewtam]

One state judge has already ruled that Detroit can't declare bankruptcy because it will reduce the pension contribution.

http://www.freep.com/article/20130719/NEWS06/307190075/Michigan-AG-challenges-judge-s-ruling-Detroit-bankruptcy-unconstitutional

[charby]

Strikes me as inappropriate for a government entity to declare bankruptcy.
The best that Detroit should be allowed to do, is stop future expenditures.  No pensions for new hires.  Eliminate the programs that exceed the budget.  Liquidate assets to offset insufficient income.  They aren't looking to exit the business of "government."  They're just looking for an excuse to stop paying people, get out of debt, then start the exact same damned thing over again with a clean ledger.

They may not legally be able to stop pension payments if Michigan has a public employees pension system for all public workers. Here is Iowa if you work for a city, county, or state there is a defined pension program that you pay into and the employing agency matches. The defined pension is determined by years of service. I think in Iowa both parties pay like 6% or something like that.

If this is the case in Detroit/Michigan, perhaps Detroit hasn't paid their bill to the state, or to the fireman/policemen's pension funds in quite a while.

http://www.michigan.gov/ors/

[AZRedhawk44]

They may not legally be able to stop pension payments if Michigan has a public employees pension system for all public workers. Here is Iowa if you work for a city, county, or state there is a defined pension program that you pay into and the employing agency matches. The defined pension is determined by years of service. I think in Iowa both parties pay like 6% or something like that.

If this is the case in Detroit/Michigan, perhaps Detroit hasn't paid their bill to the state, or to the fireman/policemen's pension funds in quite a while.

What I'm saying, Charby, is Detroit should not be eligible to escape its financial mismanagement.  It entered into agreements with all sorts of creditors, including labor unions.  It needs to honor them all.

But it needs to redefine its relationship with all future creditors to avoid this problem in the future. 

Detroit isn't likely to suffer the same fate as buggy whip and betamax manufacturers, and suddenly be irrelevant under the business heading of "government."  I can wish it with all my might but it ain't gonna happen any time soon.  People aren't ready to live without government. 

So they will have a revenue stream for FREAKING EVER.

Even if they only pay 1% a year towards their bad debts, they can pay them off in a century.  And a century is nothing to a government.

The solution is stopping the chain of future indebtedness.

Allowing them to go bankrupt will just mean that FedGuv picks up the tab, Detroit gets a clean ledger, and starts borrowing against its future again and again and again, to repeat the same process.

[Scout26]

Strikes me as inappropriate for a government entity to declare bankruptcy.

Bankruptcy is a business process wherein a faulty market concept (bad business idea) is eliminated in a way that creditors get compensated.

Ummmm, no.

There are six types of bankruptcy under the Bankruptcy Code, located at Title 11 of the United States Code:

    Chapter 7: basic liquidation for individuals and businesses; also known as straight bankruptcy; it is the simplest and quickest form of bankruptcy available
    Chapter 9: municipal bankruptcy; a federal mechanism for the resolution of municipal debts
    Chapter 11: rehabilitation or reorganisation, used primarily by business debtors, but sometimes by individuals with substantial debts and assets; known as corporate bankruptcy, it is a form of corporate financial reorganisation which typically allows companies to continue to function while they follow debt repayment plans
    Chapter 12: rehabilitation for family farmers and fishermen;
    Chapter 13: rehabilitation with a payment plan for individuals with a regular source of income; enables individuals with regular income to develop a plan to repay all or part of their debts; also known as Wage Earner Bankruptcy
    Chapter 15: ancillary and other international cases; provides a mechanism for dealing with bankruptcy debtors and helps foreign debtors to clear debts.

[Tallpine]

I don't think I've ever heard of a city dis-incorporating once it is already incorporated.

We've got lots of ghost towns out west.

[Hawkmoon]

We've got lots of ghost towns out west.

Were any of them incorporated?

If they were, did they unincorporate, or simply depopulate, leaving a shell corporation?

[Tallpine]

Were any of them incorporated?

If they were, did they unincorporate, or simply depopulate, leaving a shell corporation?

I know of at least one town in Colorado that was still technically incorporated up until the 1970s. when the county formally declared it unincorporated.  Back in the 1880s it was supposed to have had about 10K residents.

The former "city government" then became a "town association" that took over management of the one public building, and I think now also the cemetary.  It's a little place that is mostly summer residences, but I think a few people are staying year round now.  Back in the mid-1980s we were wintering a couple miles away and actually had contracts to go check on a few of the cabins once a week or so through the winter.

[zxcvbob]

I know of at least one town in Colorado that was still technically incorporated up until the 1970s. when the county formally declared it unincorporated.  Back in the 1880s it was supposed to have had about 10K residents.

Gilman, or Summitville?

[Tallpine]

Gilman, or Summitville?

Tincup, actually.

Hard to see how it could have held that many people now.  But there were a lot of mines with bunkhouses within several miles.  Back in the day it was quite a wild place, going through several sheriffs in one year.

I do remember that there was a bit of a stink and hard feelings when Gunnison County declared it unincorporated, but I can't remember the exact year.

I lived and worked in and around there off and on for quite a while but I never owned any property.  (our first daughter owns a little piece :( ).

[zxcvbob]

I thought Tincup was thriving again (in the summer anyway), having been taken over by Yuppies.

And I think I have driven over Tincup Pass from St. Elmo in a 2WD car before, but I might be misremembering that from years ago as a kid in our VW camper -- also 2WD but high ground clearance and low gears.