Detroit on the brink of financial insolvency

As much as people in DC complain about the period of the Financial Control Board, which ran DC in the mid-1990s because the city was bankrupt, DC may have been lucky in that (1) there was an entity around, the federal government, with the money and need to take the problem on and (2) the people on the board were reasonably focused and made the right decisions.

Detroit anticipates being out of money in February ("Bing says Detroit could run out of cash, open to being emergency manager" from the Detroit News) and so Mayor Bing has suggested that the State of Michigan appoint a financial receiver--someone with a lot of power to make "unilateral" decisions--and has even put himself in the running for the position.

Detroit News columnist Daniel Howes makes the point, in "Detroit’s financial reckoning is here, now," that the City of Detroit faces the same problems that the auto industry and the labor unions faced--and for the most part put off dealing with until they had no choice--during the recent decline of the industry.

From the column:

Detroit's financial reckoning is happening now. It's not "coming" and it's not "likely." It's here, a massive, slow-motion municipal train wreck in all its unforgiving, forget-about-the-past ugliness. The question is who will lead the hard workout — the city's elected officials and union leaders or an emergency manager appointed by the governor who'd rather not, thank you.

Mayor Dave Bing sparked a predictable backlash Thursday with talk of an emergency manager and the prospect of him angling for the job. Mildly surprising, given his penchant for talking tougher than he acts. But give the mayor points for being honest instead of trafficking in the rank cynicism of passionate partisan politics.

"It's the cash-flow issue that is forcing the problem," says the mayor's communications director, Steve Serkaian. The mayor is "looking at a projected shortfall of about $150 million. When the city is spending more money than it's collecting, at some point it's got to break."

So simple, so true — and so powerful. The accumulated weight of Detroit's dysfunction is reaching critical proportions: Union pension and health care costs are gutting its budget; the buses don't run and the lights don't work; tax revenue and home values are declining; a culture of entitlement quashes reform efforts; ridiculous work rules (such as paying bus drivers not to drive) burn critical cash, complicate restructuring and look comical.

Identifying remedies is the easy part. The hard part is in the doing, which is why City Council President Charles Pugh's pushback at Bing's talk of an emergency manager is so fraught. Should the council, the mayor and union leaders do the hard work? Yes.

Can they? Not if the past and present are good indicators of the future.

Look, the history of Detroit — the city and the hometown auto industry, to be specific — and its downward spiral is that its leaders and its people resist taking steps toward fundamental, politically risky change until there are a) no other options, b) the solution is imposed from outside or c) both.

The auto bailouts proved that. State takeovers of Detroit Public Schools proved that. And my guess is that the appointment of an emergency manager for the city would prove it, too, if the mayor, council and union leaders keep talking past one another because hizzoner doesn't really want to lead, the council doesn't really want to follow and the unions don't really want to move.