I was perusing a recent article over at the Atlantic’s City edition entitled “How Detroit Is Rising,”
noting the glowing opinions of various community groups in the city about their prospects. I found Detroit’s June 2011 audit from their website to get a better idea of the city’s fiscal position from the city itself.
I’ll post my findings just as a bulleted list. In the audit, available as a gigantic PDF here, you will find the following:
• Detroit’s KPMG –led audit noted that they could not find “sufficient audit evidence supporting the fair value of approximately $216,000,000 of the Retirements Systems alternative investments held at June 30, 2011”.
• The general fund balance had a $148M deficit as of June 30, 2011, an increase of $57M from the prior year.
• The total primary government’s unrestricted deficit of $1.6B, representing a shortage of assets available to meet all obligations if they were immediately due.
• Pension costs increased by $71.4M, due to higher contribution rates from poor market performance that the city was required to make.
• Plans to reduce the pension deficit are primarily going to be related to staffing reductions and furlough day, rather than any cuts to benefits.
• Reduction of pension and health care costs were related to “increased efficiencies in various departments.” However, the actual financials reported that pension costs were $177.4M in 2011, versus $106M in 2010.
• $100M bonds were issued during the year to renovate the former MGM Casino into a public safety headquarters for police, fire and IT departments.
• The Department of Transportation was unable to fund all of its employee benefit costs, so an additional $21.7M liability was recognized.
• Page 94: Spending on neighborhood city halls exceeded budget by $89K.
• Unemployment rate: 24.4%
• Per capita income in 2009: $15,210
• Over 230,000 people left the city between the 2000 census and 2010 census
• The city’s top employers were also telling: Public schools and City of Detroit account for top 1 and 2 employers; the first public corporation in the top eight employers is Chrysler Group at Number 8.
The city, in April, narrowly passed an agreement grating the city power to void contracts and slash some costs. This avoided a takeover by the state. Are these the types of civic activities indicative of a city rising?
on the real-world effects Central Falls, RI’s receiver is having on pensioners in the bankrupt town.
“Executive pay used to be 30 or 40 times the wages of the lowest paid worker, now it is more like 300 or 400 times.”
The BBC is running an article today outlining common arguments against executive pay that is many multiples of the pay of the average employee in the corporation.
Would it be acceptable of pay was locked at 200 times? What about 250 times? What if shareholders agree to 500 times?
Edit Sunday PM: Looks like the situation is more complicated than I made it out to be; UK taxpayers have a majority stake in RBS: http://www.bbc.co.uk/news/uk-16783571. Hester has since refused the payment.
The BBC reported today on public outrage on the one million pound payout for RBS CEO Stephen Hester. A group called the “High Pay Centre” is apparently monitoring compensation in the City, and conducted a survey on both the payout and “crony capitalism.”
Only 2/3s of the people surveyed expressed outrage over crony capitalism. Where are the other 1/3? Perhaps the group is really the 1%-ers and created some mathematical machination to skew the survey’s results.
What constitutes unreasonable pay? At what figure does the High Pay Centre take notice, and why not more, or less? If a figure, or a range of figures, can be arrived at, it is still not clear why we should be outraged at these decisions. Unless we are already shareholders in RBS and feel this money could have been better invested or wasn’t needed to retain the talents of Mr. Hester , isn’t it permissible for private entities to do what they wish with their capital? Exceptions should be carved out for funds directed towards illegal activities.
The video ends with a note that many do not find that compensation committees determine such bonuses in an open in a transparent way. If the methods and formulas used to compute Mr. Hester’s bonus were publicly accessible, would the resulting figure be acceptable?
Finally, a different kind of anger is directed towards outright frivolity. However, few people support restrictions on spending money in ways that are generally considered silly. Should we also be outraged at Tommaso, the Italian cat, who recently inherited thirteen million euros and two Italian villas? Why is the character of our collective outrage over Tommaso’s payout different than that of Mr. Hester? If the reasoning behind the Italian Heiress’s decision to donate her fortune to the cat is closed to the public and not transparent because of its silliness, shouldn’t we be more outraged than we are at Mr. Hester, whose compensation and performance metrics are clearly seen by any individual interested in looking at RBC’s annual financial statement?