By John Clark
A report this week from Detroit’s emergency manager says the downtrodden city is completely broke and may soon have to file for bankruptcy, according to the Associated Press.
The report, a 41-page analysis that aimed to portray a realistic picture of the city’s finances, said Detroit is on the verge of financial collapse, which would lead to lost paychecks for city workers, deep service cuts, and the loss of pension benefits.
And Kevyn Orr, the city’s emergency manager, believes that Detroit’s only remaining option could eventually be a trip to bankruptcy court.
Detroit May Soon File for Municipal Bankruptcy
As the city teeters on the brink of financial collapse, Orr has been given the unenviable task of negotiating deals with Detroit’s numerous creditors.
But James McTevia, a financial expert in Detroit, believes that Orr may head to bankruptcy court when he “gets his back against the wall and he can’t meet payroll.”
If such a dire scenario does happen, Orr would be left with few options besides seeking the protection of a bankruptcy judge.
And the report released this week does not bode well for Orr’s attempts to avoid bankruptcy. Sources say Detroit had a staggering $162 budget shortfall as of April 26, and that the deficit will likely approach $390 million in the next two months.
Orr noted in his report that the data could change as his team gathers more information, but said that “continuing along the current path is an ill-advised and unacceptable course of action if the city is to be put on the path to a sustainable future.”
Detroit Sets New Standard for Financial Irresponsibility
According to sources, Detroit is the largest city in the United States to be forced into state control, and the city’s financial collapse led to the extreme solution of placing a single person in charge of its money.
Sources say Orr controls how Detroit spends its budget, as those decisions have been removed from the control of Mayor Dave Bing and the City Council.
The two sides, however, seem to be cooperating, as a recent statement released from Bing’s office says that Orr’s conclusions are “consistent” with the administration’s own findings.
Sources also note that Detroit’s financial woes started well before Bing, a former professional basketball star, took office.
Nevertheless, Bing is now the captain of a sinking ship. In Orr’s words, the city’s operations have been rendered “dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption.”
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