Mike Wilkinson form Mlive.com wrote an interesting article about Detroit’s revenue and potential to bounce back from its bankruptcy filing. Part of the job of Detroit’s bankruptcy attorneys is showing to the bankruptcy court that Detroit will improve for the betterment of its residents after the bankruptcy filing.
Detroit’s bankruptcy attorneys will have a difficult time showing that the bankruptcy plan is still feasible even when considering legacy costs from retiree health plans.
Detroit is known by its most unwelcome attributes: It has one of the highest murder and violent crime rates in the country. And it currently is known as the most populous U.S. city to ever seek bankruptcy protection.
Can it also enjoy the biggest recovery?
So much is still up in the air – U.S. Bankruptcy Judge Steven Rhodes will decide whether to adopt the city’s cost-cutting plan following a trial that begins in August– that it’s not clear whether Detroit will be positioned to succeed a year from now.
But we can ask questions of its recent past to get a hint at its future: Does the city generate enough money to fix what ails Detroit if billions in debt are cut? Are the city’s costs too high? Does it pay its workers too much? Are pensions too generous? Can the city endure a reduction in both spending and revenue and revive what is by most measures the most dysfunctional large city in America?
“I think that’s one of the great questions coming out of bankruptcy: What is the budget going to be and what does the city need it to be?” said Eric Scorsone, a Michigan State professor and expert on city finances who is writing a book about Detroit’s financial history dating to the 1950s.
Big revenues, but still struggling
At first blush, Detroit doesn’t suffer from a revenue problem. It can count tax sources that most Michigan cities cannot (casino, utility and income taxes). And it gets the largest chunk of the state’s revenue sharing.
Its general fund (excluding money raised and spent by the water and sewerage department) generated nearly $1.7 billion in taxes and other revenues in 2011. At $2,346 generated per city resident, that’s 42 percent higher than the median ($1,650) of the country’s largest cities, according to a report last year by the Pew Charitable Trusts.
It also ranks tenth-highest among those 30 cities, below Washington, New York, San Francisco and others, but well above other Midwest cities Cincinnati, Chicago, Pittsburgh, Cleveland and Minneapolis.
http://www.mlive.com/news/detroit/index.ssf/2014/07/can_detroit_pay_its_bills_afte.html
