Tuesday, February 23, 2016

Big pension bomb looms: Bankruptcy didn't solve all of Detroit's financial problems

Downtown Detroit
Detroit's 2013 bankruptcy left behind a significant unresolved pension problem.

From the Detroit Free Press:
Detroit Mayor Mike Duggan painted a picture of progress and at the same time significant challenge ahead for the Motor City, saying during his third State of the City address Tuesday night that property values are up, people are moving back in and blight is being removed at a record pace.

But he also said there's a major financial cloud looming in the form of a $490-million pension shortfall the city will have to begin paying in 2024 that could take a significant chunk of the city’s budget and potentially derail reinvestment in critical city services.

"We're going to have to address this problem," Duggan said to an audience of hundreds at Second Ebenezer Church just off of I-75 and McNichols for the invitation-only speech. “We’re not asking anybody for a bailout. … This wasn;t a problem of our making, but we're going to manage it."

Duggan's harshest comments of the address were against consultants who advised the city through its unprecedented Chapter 9 bankruptcy, who he said were paid $177 million for their work, "and once they're out of town there's a $490-million hole."
Kudos to Duggan for bringing this problem now, instead of kicking the can down the road as has been done in the past in the Motor City, as well as in Illinois.

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