Saturday, December 24, 2011

looking up, detroit faces new crisis

NYTimes | For a city that some have declared dead again and again, the talk of late here was of renaissance — of auto industry jobs growing, new companies moving into empty buildings downtown, urban gardens blooming in vacant lots.

Then came the revelation that Detroit is poised to run out of money by April and fall deep into debt by June. Now a place that had seemed to be finding its balance is reeling once more.

A formal state review of Detroit’s books — a step that could lead to the appointment of an outside emergency manager to take over the city’s finances — was announced this week. City leaders are conducting urgent meetings with labor union leaders and financial consultants in a race to cut costs and head off further intervention.

The possibility that an outside manager could come in — one who would have broader than ever powers under a rewritten state law — has stirred new concerns among financial ratings agencies and business leaders who have fresh investments in the city. City government, meanwhile, is finding itself forced to re-examine services it provides — including buses, health care and street lighting — and shed what it can no longer afford.

The crisis could not have come at a worse time.

“This state is starting to come back, the economy is starting to come back, and as long as you are out there promoting all this negativity, it’s no good for any of us,” Mayor Dave Bing said in an interview. “You don’t need Detroit against the state.”

Still, Mr. Bing, a former basketball star who built an auto-parts manufacturing company, says he also knows the risks — symbolically, financially and politically — if a city of this size reaches a point where it cannot pay debts.

“If Detroit would ever go into default, it would kill the state,” he said, quickly adding that he did not think the situation would come to that.

Already, though, Detroit is the only major American city with credit that sits beneath investment grade, experts say. With 11,000 city employees and 139 square miles of increasingly vacant land to tend to, it has struggled, year by year, deficit by deficit, to pay its bills. Once the nation’s fourth-largest city, it has seen its population drop since a high of 1.8 million in 1950 to a low last year of 714,000.

In the eyes of some leaders, this financial crisis, despite the recent positive signs from the private sector, was decades in the making: the city never shrank its operations enough to match a shrinking tax base, and it delayed its woes with borrowing, exaggerated revenue estimates and accounting shifts.

This fall, Mr. Bing warned that Detroit would run out of cash without major cuts, particularly layoffs and deep salary reductions.


umbrarchist said...

The problem is they never faced the crisis of physics and the auto industry still does not address it.  Instead we get THIS:

I think that is a great commercial.  But I haven't been to an auto show in 20+ years and I presume the car is garbage.  In 1977 when Star Wars was released I bet there were very few cars with remote controls.  I wonder how many 1977 cars I would prefer to that Volkswagen.  The Laws of Physics have not changed  since 1977.  Why are we redesigning cars?  They could put in better electronics without changing the mechanics.

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