Is Detroit Really Rising?

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?

This entry was posted in Accounting Standards, Economics, Government Failure, Municipal Debt, Unfunded liabiltiies. Bookmark the permalink.

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