Posted on December 15, 2010

Detroit Mayor Plans to Halt Garbage Pickup, Police Patrols in 20% of City; Expect Bankruptcy, Massive Municipal Bond Turmoil in 2011

Mike “Mish” Shedlock, Global Ecnoomic Analysis, December 13, 2010

Detroit has been bankrupt for years. It simply refuses to admit it. Detroit’s schools are bankrupt as well. A mere 25% of students graduate from high school.

Yet, in spite of hints and threats from mayors and budget commissions, and in spite of common sense talk of bankruptcy, Detroit has not pulled the bankruptcy trigger.

In a futile attempt to stave off the inevitable one last time, Mayor Bing’s latest plan is to cutoff city services including road repairs, police patrols, street lights, and garbage collection in 20% of Detroit.

Bing to Cede 20% of Detroit to Gangs and Homeless

City officials suggest this will not shrink the size of the city. Perhaps it won’t shrink Detroit on Google Maps. However, Bing’s plan would effectively surrender 20% of the city to gangs and the homeless.

Would you want to live in one of the gang war-zones that his plan would create? Would you want to live in a bordering neighborhood or in a bordering city?

Regardless of your answer, Bing’s plan cannot and will not work and I believe Detroit will, sometime in 2011, file for bankruptcy. If so, expect massive turmoil in municipal bonds.

Less Than a Full-Service City

The Wall Street Journal discusses Bing’s plan in Less Than a Full-Service City

More than 20% of Detroit’s 139 square miles could go without key municipal services under a new plan being developed for the city, with as few as seven neighborhoods seen as meriting the city’s full resources.


Mr. Bing’s staff wants to concentrate Detroit’s remaining population–expected to be less than 900,000 after this year’s Census count–and limited local, state and federal dollars in the most viable swaths of the city, while other sectors could go without such services as garbage pickup, police patrols, road repair and street lights.

Karla Henderson, a city planning official leading the mayor’s campaign, said in an interview Thursday that her staff had deemed just seven to nine sections of Detroit worthy of receiving the city’s full resources. She declined to identify the areas, but said the final plan could include a greater number.


Repurpose or Abandon?

Of course the Mayor’s office did not say they would abandon sections of the city to gangs. But how the hell can repurposing as described above possibly mean anything else?

What’s next? Barbed wire? Oh wait a minute, Detroit already has tried that. Razor-wire too.

Detroit’s Tax Collection Process


The City of Detroit has failed for nearly four years to send property tax bills to the owner of the Packard plant, costing the city badly needed cash.

At 3.5 million square feet, the plant is by far the largest derelict property in Detroit.

It wasn’t until the Free Press began making inquiries last week that the city’s assessor’s office returned the property to the tax rolls–with an assessed value of nearly $1.6 million. {snip}


Robin Boyle, professor of urban planning at Wayne State University, said the error underscores “just how challenged the city is in dealing with the fundamental task of title, control, oversight and follow-through” with property throughout the city.

“To me, that is a fundamental problem that leaves Detroit in a consistently weakened position. It can’t even do the basics,” Boyle said. “This is a huge piece of real estate, and yet, there’s still confusion.”


Detroit Schools Bankrupt

Flashback July 24,2009: The Wall Street Journal reports Detroit’s Schools Are Going Bankrupt, Too

Now’s the time to cast off collective bargaining agreements and introduce school choice.

‘Am I optimistic that they can avoid it . . . ? I am not.” That’s what retired judge Ray Graves said this week when asked whether the Detroit public schools, which he is advising, would be forced into bankruptcy. {snip}

As embarrassing as such a filing would be, it also may be the only thing that can force the kinds of changes Detroit schools need–as the financial turmoil is just the latest manifestation of a system in terminal decline.


The Economic Base

The deterioration of the economic base of the city has accelerated. There were an estimated 81,754 vacant housing units (22.2 percent of the total) in Detroit before the recession; that number increased to an estimated 101,737 (27.8 percent of the total) in 2008.

The average price of a residential unit sold in the January through November, 2009 period was $12,439, down from $97,847 in 2003. Remaining businesses and individuals are challenging property tax assessments on parcels that have lost value and, in some cases, cannot be sold at any price.

More than half of employed city residents work outside the city limits; the metro area has the highest unemployment rate of the 100 major metro areas in the U.S.


Bing Still Pretends–How Long Can It Last?

For reasons unknown, Bing just cannot do what is right. He will not come flat out and say what everyone in their right mind knows–that Detroit is fiscally and morally bankrupt and so are its schools.

Instead, on December 10, 2010 Detroit, whose population has dropped by half since 1950, borrowed $100 million to turn the MGM Grand Casino’s former site into a headquarters for the police, fire and emergency-services departments.

The city sold so-called Recovery Zone Bonds authorized under the U.S. economic-stimulus plan, borrowing at 4.55 percent, the city said in a press release today. The bonds, with the longest term maturing in 2035, were sold through the Michigan Finance Authority by investment banks led by Siebert Brandford Shank & Co., according to data compiled by Bloomberg.