Detroit Facing Bankruptcy, Default in Coming Months
Detroit, Michigan is in very real jeopardy of defaulting on its debt obligations in the next four months, Mayor Dave Bing said in a televised address this week in which he unveiled a proposal to reform the city's pension plan, cut medical care costs and layoff a number of city employees. "Without change, the city could run out of cash by April, with the potential cash shortfall of $45 million by the end of the fiscal year," Bing proclaimed in his remarks.
Bing noted that his proposal would save the city about $40 million, and avert the very real possibility of the city either going bankrupt or defaulting on its obligations. While the mayor's proposal would cut numerous city jobs in a variety of departments, economists warn that failure to act would result in many more jobs being lost when the city eventually defaults and public works such as garbage collection and public transportation have to be shut down.
One economist said that if the Mayor's proposal is not approved, there is no doubt the city will file for bankruptcy in the next few months. Detroit's Planning and Economic Development Committee began reviewing Bing's proposal late last week, and a vote on the budget cuts could be reached in the next few weeks, barring any unforeseen roadblocks. Bing has taken abundant criticism in the press over proposed layoffs to police and fire fighters, particularly since the city is home to one of the highest crime rates in the country.
Included in Bing's proposal are an across-the-board 10 percent reduction in wages for all government employees, a 10 percent reduction in employee contributions to their healthcare coverage, cuts in pension plans, and an increase of just under 1 percent to taxes paid by corporations based in the city.
|
