Saturday, April 07, 2012

Stalled in Motor City

Detroit skyline: Shawn Wilson, Wikicommons
A desperate tussle over whether the state of Michigan should take over Detroit

Apr 7th 2012 | DETROIT | from the print edition, co-written Rosemarie Ward.

APART from more money, what the city of Detroit needs most is certainty. Both are in short supply at the moment. On March 21st a state-appointed review team unanimously agreed that it is suffering a “severe financial emergency”. The day before, Moody’s had downgraded more than $2.5 billion of the city’s debt, citing its lack of cash. Amid this deepening financial crisis the state of Michigan, local unions, the mayor, the city council and the courts are battling over the future of Motor City.

The simplest solution, a state bail-out, is tricky. Both the governor of Michigan, Rick Snyder, and the head of the state’s House Appropriations Committee, Chuck Moss, argue that yet another infusion of cash will not solve Detroit’s underlying problems. To prove his point, the governor recently reminded citizens that the city has borrowed $600m since 2005 just to get by. It is also planning, with some state support, to issue $137m in bonds in order to refinance its debt and create cashflow that will allow it to totter on until the end of the financial year. [More...]