Stateside: Detroit's financial predicament

Nov 13, 2012

Detroit’s financial status is once again on the brink of devastation.

The city’s program management director, William Andrews, recently told the advisory board that the city is facing financial crisis.

Detroit News business columnist Daniel Howes assessed the city’s situation, looking at its aging bureaucracy as a potential area of conflict.

The collapse could occur sooner than expected, said Howes, perhaps as soon as December.

“It could happen as early as next month. What’s hanging out there right now is about $80 million in bond proceeds that the State Treasurer's Office is holding  more reforms within the city. There is hope they can move ahead with some reforms that would release around $30 million by the end of the year. It’s really important to note that time is running out for the city,” said Howes.

Contractual complications impede Treasurer Andy Dillon from releasing the needed funds for the city.

“A set of contracts need to be renewed. Any city that is operating in a deteriorating cash position, as long as they’re paying people, they’re burning cash. The revenue intake from the city is about $18 million dollars short,” said Howes.

Though there exists a competent City Council, the mayor has failed as of yet to establish an efficient relationship with them.  

“The mayor has got the brightest council that I’ve seen. The mayor has shown an appalling ability to build political alliances. The pace at which they’re doing things shows they don’t appreciate how serious the situation is,” said Howes.

According to Howes, for there to be sufficient reform within the city, the aging bureaucratic system must witness reform.

“The problem here is that you have an old Detroit bureaucracy that is not used to moving quickly and is very resistant to somebody pushing them from the outside,” said Howes.

For Howes, Detroit’s potential bankruptcy would have state-wide implications, as it would project an image of failure to the entire nation.

“Think about the PR image the city and the state takes. You become the only place in the United State where your signature industry has gone through a highly publicized bankruptcy bailout and the city itself becomes the largest municipal entity in the country’s history to go through bankruptcy. If that doesn’t have failure written all over it, I don’t know what does,” said Howes.

-Cameron Stewart

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