Decades of bad luck, racism, and awful management are biting Detroit in the ass
Detroit is out of money and unable to borrow any more. They owe billions and billions to workers for pensions and healthcare and stand poised to get them all the finger.
Hardworking Americans who signed a contract saying they'd labor for Detroit for their whole lives in exchange for some small measure of security in their retirement are about to get utterly and royally screwed. They took pay cuts during their working years because they were promised a slightly better retirement.
It seems to me that taking care of your debts to your people should be the *first* thing you spend your money on, not the last.
But recent findings from a state-appointed review team and interviews with past and present city officials also suggest a city that over the years was remarkably badly run.
The state review team found in recent months that the city’s main courthouse had $280 million worth of uncollected fines and fees. No one could tell the team how many police officers were patrolling the streets, even though public safety accounted for a little more than half the budget. The city was borrowing from restricted funds and keeping unclaimed property that it was required to turn over to the state. In some city departments, records were “basically stuff written on index cards,” as one City Council member put it.
“This was bad decisions piled on top of each other,” Gary Brown, the Detroit City Council president pro tem, said the other day. “It has all been a strategy of hope. You keep borrowing where every piece of collateral is already leveraged. You have no bonding capacity — you’re at junk status. You’re overestimating revenues and not managing the resources. Now the chickens have come home to roost.”
Once the nation’s fourth-largest city, Detroit had grown up around the auto industry, booming right along with it in the 1950s. City workers gained ground with pay increases intended to keep pace with those the United Auto Workers won for its members, analysts said.
“It was easy to do so back in the 1950s,” said Joseph L. Harris, Detroit’s former auditor general. “The city had 1.8 million residents then.”
But as auto jobs moved elsewhere and the region aged, Detroit’s labor costs — retiree health care costs, especially — ballooned.
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To preserve cash, the city resorted to increasing its workers’ future pensions at contract time, instead of raising their pay. That helped balance the immediate budgets, but set up a time bomb sure to explode as more workers retired.
The cost of the retirees’ pensions also grew because of an inflation-protection feature that compounds every year. Detroit cannot renege on paying the benefits, at least outside of bankruptcy, because the State Constitution makes it unlawful to reduce pensions after public workers earn them.
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