/Detroit

[Jenksismyhero]

Isn't it pretty much the whole point of filing for bankruptcy to answer a question like that?

 

It's used to wipe the slate clean, yes, but often times the businesses that file are failing so badly they just end up back in debt and close shop anyway. Or even more often, they clean their books of debt and then find a bigger buyer to take the business. That's why I'm wondering if tons of investment is really worth it here. You're basically asking Detroit to take out a loan the first day of being debt free. Their pension system, which I think is constitutionally protected from becoming an "unsecured" debt (i.e., they won't take pennies on the dollar), is underfunded by like 10 billion.

 

 

Edited July 18, 2013 by Jenksismybitch

[lostfan]

It's used to wipe the slate clean, yes, but often times the businesses that file are failing so badly they just end up back in debt and close shop anyway. Or even more often, they clean their books of debt and then find a bigger buyer to take the business. That's why I'm wondering if tons of investment is really worth it here. You're basically asking Detroit to take out a loan the first day of being debt free. Their pension system, which I think is constitutionally protected from becoming an "unsecured" debt (i.e., they won't take pennies on the dollar), is underfunded by like 10 billion.

Oh, I wasn't talking about investing like with municipal bonds, I meant like if I was looking to start a business or expand. I could get a bunch of property in Detroit for dirt cheap (cheaper than now) and do whatever I wanted with it.

[Jenksismyhero]

Oh, I wasn't talking about investing like with municipal bonds, I meant like if I was looking to start a business or expand. I could get a bunch of property in Detroit for dirt cheap (cheaper than now) and do whatever I wanted with it.

 

Ah. Well that might be worth it. But I dunno, it's pretty dirt cheap now isn't it?

[lostfan]

Ah. Well that might be worth it. But I dunno, it's pretty dirt cheap now isn't it?

Yeah... I guess part of the problem is there's a lot of stuff that is kind of in the way that still belongs there and you can't build around it and can't provide services for the 2 people left on a city block, so you'd need some help from eminent domain or something like that, some kind of major revitalization plan that does a lot all at once.

[illinilaw08]

It's used to wipe the slate clean, yes, but often times the businesses that file are failing so badly they just end up back in debt and close shop anyway. Or even more often, they clean their books of debt and then find a bigger buyer to take the business. That's why I'm wondering if tons of investment is really worth it here. You're basically asking Detroit to take out a loan the first day of being debt free. Their pension system, which I think is constitutionally protected from becoming an "unsecured" debt (i.e., they won't take pennies on the dollar), is underfunded by like 10 billion.

 

Chapter 9 is a weird title of the Bankruptcy Code (municipalities in bankruptcy) and really has very little in common with Chapter 11 where a business would usually fall. Creditors have significantly less rights and the 10th Amendment affords significant additional protections on the muncipality.

 

The issue as I understand it right now is that the Detroit pension system is attempting to obtain a state court ruling holding that Detroit cannot file bankruptcy since pension rights are protected by the Michigan constitution. The hearing on that issue in state court is set for Monday. A bankruptcy filing on Friday would stay that hearing and, probably, force a bankruptcy judge to hear the issue of whether Detroit has standing to be a debtor in bankruptcy first.

[lostfan]

Depending on how that goes in court, if the union loses it will f*** over public union pensioners elsewhere jn the country really bad, they'll be up the creek without a paddle.

[Balta1701]

Depending on how that goes in court, if the union loses it will f*** over public union pensioners elsewhere jn the country really bad, they'll be up the creek without a paddle.

For the first time ever you've suddenly got every Republican cheering on Detroit.

[Cknolls]

For the first time ever you've suddenly got every Republican cheering on Detroit.

 

 

 

[Jenksismyhero]

Someone read my post!

 

http://stlouis.cbslocal.com/2013/07/10/ill...icago-violence/

 

Funny that she called Rahm, Ron. And she's from Chicago.

 

Sigh, and then she turns crazy:

 

http://chicago.cbslocal.com/2013/07/19/sta...mL7mNSCR8.email

 

That's right, i'm not saying the CPD are killing those black kids. But i'm also not NOT saying they're killing those black kids.

[mr_genius]

Sigh, and then she turns crazy:

 

http://chicago.cbslocal.com/2013/07/19/sta...mL7mNSCR8.email

 

That's right, i'm not saying the CPD are killing those black kids. But i'm also not NOT saying they're killing those black kids.

 

it all makes perfect sense now. also, can anyone disprove that George Zimmerman is not in the city as well? possibly the source of these crimes?

Edited July 19, 2013 by mr_genius

[pettie4sox]

it all makes perfect sense now. also, can anyone disprove that George Zimmerman is not in the city as well? possibly the source of these crimes?

 

[lostfan]

Michigan courts order the bankruptcy filing withdrawn because it's against Michigan's constitution. Next stop feds?

[mr_genius]

Michigan courts order the bankruptcy filing withdrawn because it's against Michigan's constitution. Next stop feds?

 

if the bankruptcy is denied, but they literally have NO money, how will they pay the pensions? Try to get a loan? Sell junk bonds? I don't see how it would end. Anyone know?

[lostfan]

if the bankruptcy is denied, but they literally have NO money, how will they pay the pensions? Try to get a loan? Sell junk bonds? I don't see how it would end. Anyone know?

No idea. If you're working for a company when this happens you're basically f***ed. Which is why my dad has nothing to show for any of his jobs in his adult life until his 50s.

[NorthSideSox72]

If they can't file for bankruptcy... they just stop paying service on their debt. And they go into a series of ugly defaults. Loan companies sue to get their money. Detroit says, sorry, can't help you. This goes on for a while.

 

If the state or other entity doesn't give them piles of cash (which they don't have, and it would be stupid anyway in that circumstance), then essentially, Detroit becomes a deadbeat business entity. But amazingly, since they are not a business per se, they will still keep getting revenue from taxes, and theoretically keep some services running ad infinitum.

 

However, after some period of time, debtors will start claiming property. So Detroit starts losing physical assets, like let's say, buses and fire trucks.

 

This just keeps going in a seriously ugly cycle, until one of the following occurs:

 

--Fed or state government steps in AND is able to fund the city during a turn-around

--Private investors "buy" the city's management and services, which I am not sure will fly legally anyway

--The state of Michigan amends its constitution (the most sane option) to get rid of the absolute pension protections

--A federal court finds the pension protections somehow improper or in violation of federal laws

--The City of Detroit empties almost entirely, eventually leaving no city government at all, putting all that burden on the county and state

 

There is no good ending here.

 

[lostfan]

If they can't file for bankruptcy... they just stop paying service on their debt. And they go into a series of ugly defaults. Loan companies sue to get their money. Detroit says, sorry, can't help you. This goes on for a while.

 

If the state or other entity doesn't give them piles of cash (which they don't have, and it would be stupid anyway in that circumstance), then essentially, Detroit becomes a deadbeat business entity. But amazingly, since they are not a business per se, they will still keep getting revenue from taxes, and theoretically keep some services running ad infinitum.

 

However, after some period of time, debtors will start claiming property. So Detroit starts losing physical assets, like let's say, buses and fire trucks.

 

This just keeps going in a seriously ugly cycle, until one of the following occurs:

 

--Fed or state government steps in AND is able to fund the city during a turn-around

--Private investors "buy" the city's management and services, which I am not sure will fly legally anyway

--The state of Michigan amends its constitution (the most sane option) to get rid of the absolute pension protections

--A federal court finds the pension protections somehow improper or in violation of federal laws

--The City of Detroit empties almost entirely, eventually leaving no city government at all, putting all that burden on the county and state

 

There is no good ending here.

The state government has had multiple opportunities over the past couple of decades to get into some sort of revenue-sharing or regional system that would've helped stop Detroit's downward spiral, and they've refused each time because they felt like Detroit wasn't their problem. Well, problem is that the bond markets are going to adjust and Michigan's rates will go up because they know Michigan didn't bother doing anything about Detroit when they had the chance. That'll be felt in their budgets. Kind of like how stupidly letting the US government default for no reason would get the US credit rating downgraded and make the rate on bonds go up.

[Cknolls]

Michigan courts order the bankruptcy filing withdrawn because it's against Michigan's constitution. Next stop feds?

 

But she is sending a copy of her well thought out ruling to Narcissus. He will save the day.

[Cknolls]

Maybe all the state and local govt's will stop using accounting fraud when compiling pension obligations. Rates of return need to be lowered to a more reasonable 4-5% and so to does the discount rate. But if then no politicians would get elected because people would see what a crock of s*** they've been selling hem. But I blame all the gov't workers for actually believing the nonsense these people spew. We get what we elect. A far as I'm concerned I hope it happens here sooner than later so we can be more realistic in our benefits for everyone.

[G&T]

if the bankruptcy is denied, but they literally have NO money, how will they pay the pensions? Try to get a loan? Sell junk bonds? I don't see how it would end. Anyone know?

 

Layoffs and higher taxes. I'm pretty state and local govt has a cap on borrowing unlike the Feds.

[Balta1701]

Maybe all the state and local govt's will stop using accounting fraud when compiling pension obligations. Rates of return need to be lowered to a more reasonable 4-5% and so to does the discount rate. But if then no politicians would get elected because people would see what a crock of s*** they've been selling hem. But I blame all the gov't workers for actually believing the nonsense these people spew. We get what we elect. A far as I'm concerned I hope it happens here sooner than later so we can be more realistic in our benefits for everyone.

Why should pension plans project returns that are so far below the rates that have been observed historically?

[EvilMonkey]

Why should pension plans project returns that are so far below the rates that have been observed historically?

Are you seriously asking why pension plans shouldn't take into account the current economy and rate of returns for other investments that are happening NOW, but instead should base their predictions on what they did 5, 10, 20 years ago?

[G&T]

Are you seriously asking why pension plans shouldn't take into account the current economy and rate of returns for other investments that are happening NOW, but instead should base their predictions on what they did 5, 10, 20 years ago?

 

Wisconsin and others I'm sure, do take current conditions into account. There are floors and ceilings on benefits during a given year.

[Balta1701]

Are you seriously asking why pension plans shouldn't take into account the current economy and rate of returns for other investments that are happening NOW, but instead should base their predictions on what they did 5, 10, 20 years ago?

Yes, they should absolutely take into account the rate of return on investments over time. Why are people claiming that on average they will make smaller returns over time than they have over the last 50 years?

 

If you're in 1999 and the PE ratio is over 30, that's one thing. That's not the case now. That certainly wasn't the case a year or two ago, but people who want to slash pensions say things like this regardless of the time.

 

A 7-8% projection right now really isn't that outrageous. There is still reasonable space for this market to go up. If you use a basic projection of the growth rate based on historic PE ratio trends a 5% growth rate projection should seriously underestimate the market performance. That's 2% inflation + 3% GDP growth plus 0 equity premium.

 

Detroit's pension problem continues to be the fact that the population has shrunk by more than 50%. You can't fund a pension for anyone when the company is 1/2 the size it used to be.

[NorthSideSox72]

Layoffs and higher taxes. I'm pretty state and local govt has a cap on borrowing unlike the Feds.

That will buy them some, but, there are limits. Detroit is WAY under right now. And if you lay off a lot, and raise taxes a lot, then you lose some of that revenue when people leave in even higher numbers, and are left with an even lower-paying and non-paying tax base. They may be beyond where that spiral can be stopped.

 

[G&T]

That will buy them some, but, there are limits. Detroit is WAY under right now. And if you lay off a lot, and raise taxes a lot, then you lose some of that revenue when people leave in even higher numbers, and are left with an even lower-paying and non-paying tax base. They may be beyond where that spiral can be stopped.

 

Then they sell off land in huge chunks and pull the city limits in. Shrink the area that needs services. I'm guessing that will be difficult since other suburbs won't be looking to expand and its the opposite of every other city's position. But there are no easy options.