Headed For Bankruptcy

Headed For Bankruptcy

A once proud city is now in crisis mode and headed for bankruptcy. It appears to only be a matter of time. The City of Detroit’s borrowing keeps getting downgraded and is probably somewhere between junk bond status and just junk. They say an alcoholic can’t begin the path to recovery until he or she admits that they are, in fact, an alcoholic. The administration of the City of Detroit is in denial. They do not have a problem and will not agree with any plans to solve the problem that they do not have. Sure! Cash is running out and there appears to be no agreement between the City Council and the Mayor to agree to anything.

How did a once proud city end up in this mess?

Just take a look at the empty lots, the abandoned houses that need to be taken down, the revenue that isn’t there, the street lights that don’t work and the buses that don’t run on time – but I guess things are just fine? No they are not and they need to be corrected.  Mayor Bing is frustrated that the City can’t move forward.

Forward to where?

When the City of Detroit had a larger population years ago in excess of one million people maybe a mayor and a city council made sense, but now I doubt it. We have too many chiefs and no Indians. Yes, maybe we do have too many city workers but that can be corrected over time through attrition and the elimination of wasteful work rules and outsourcing. But now with a population of under or near 650,000, we appear to have made no meaningful change in the way we govern Detroit.

The figures that I reviewed are staggering. The City of Detroit has nine (9) City Council members with a budget of $8,271,003. Impossible you say. Each City Council member has a budget of more than $700,000 each. This budgeted amount does not include the salary of each of the City Council members that can run between $76,911 and $80,000 for each City Council member. Are you sitting down? The budget request for 2012/2013 for the Mayor’s Office for the City of Detroit is $6,977,825 which includes a staff of 50 actual heads! We are looking at over $15,250,000 in salary and staff to administer to a city that is shrinking faster than a 100% cotton T-shirt in hot water.

Sadly, bankruptcy may be the only way to bring sanity back into the City of Detroit. The pay range for the CFO of Philadelphia with a population of 1.5 million is $175,776 with Mayor Bing hauling down $158,558 for a city that is easily one-third the size of Philadelphia. You can easily see why no one in the City administration wants to give back salary or benefits until the fat lady stops singing! And by the way, the budget for the Mayor’s residence in Detroit is another $129,113 added to the already bloated budget.

In 2004, the City of Detroit had 13,468 city workers. This is easily twice the number of city workers with a population of 650,000. In April of 2011, the City of Detroit still had 12,900 city employees. Compared to Memphis, Tennessee with a population of 646,889, Memphis had 6,400 city workers. Even Charlotte, North Carolina with a population of 731,424 had only 6,703 city workers so Detroit can’t argue that the population in the city is closer to 700,000 so 12,900 city workers are justified. I can’t imagine how this “out of touch with reality” situation in the city is going to be resolved. It would be like the pre-bankruptcy General Motors having its top managers sit around a table and try and decide which division or divisions that they were going to eliminate to survive! It just would never happen.

I guess that when the money runs out, the party is over. I hate to see this happen but the City of Detroit can’t go much longer. The revenue is not there. Maybe a restructured and reconfigured city will be the answer. We will soon find out.

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Written by
Donald Wittmer