Stateside
4:44 pm
Wed August 20, 2014

Will Detroit be able to pay its bills after bankruptcy?

Credit JSFauxtaugraphy/Flickr

Bridge Magazine writer Mike Wilkinson recently wrote a piece that explored the dollars-and-cents of Detroit, post-bankruptcy and beyond.

It's titled “Can Detroit Pay Its Bills Post-Bankruptcy?”

Wilkinson said though Detroit has been cash strapped for a while in terms of debt, it does generate a lot of money. It has the highest income tax and property tax in the state. It is the only city in the state allowed to levy a utility tax. And it has an averaged $179 million in casino taxes.

“It’s raising more money than Cincinnati, Chicago, Kansas City, Orlando, in terms of per person,” Wilkinson said.

Assuming that Kevyn Orr’s Plan of Adjustment is approved by Judge Rhodes, will this revenue be enough to pay the bills? Wilkinson wrote in his piece, “Revenues alone do not a budget make.”

And Eric Scorsone, an MSU professor and expert on city finances, said in order to answer that question, we must ask what will Detroit spend the money on?

“The truth is it would be very easy to overspend again as Detroit has in most of its history, and that’s going to be the real challenge for the political leadership of Detroit.” Scorsone said.

Scorsone is writing a book about Detroit’s financial history dating back to the 1950s, where most of the city’s money issues stem.

Scorsone said Detroit has a lot of taxes and tax policy issues. Post-bankruptcy, he said, many questions will arise on whether there need to be changes in policy. Also, there will be questions about the how the state's control board will help the city make good spending decisions.

“It’s going to come down to discipline,” Scorsone said. “Even if you reduce the debt – and you see this in a lot of corporate bankruptcies – corporations go in, they reduce the debt, and three years later they are back in bankruptcy.”

*Listen to the full interview with Mike Wilkinson and Eric Scorsone above.