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Old 09-25-2017, 03:17 PM
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Mary Pat Campbell
Join Date: Nov 2003
Location: NY
Studying for duolingo and coursera
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Detroit pitch for Amazon: We've already been to bankruptcy court

There's really no telling what Amazon CEO Jeff Bezos really wants in the city that will host his online retail company's second North American headquarters.

But if he's looking for a city in the Rust Belt that has already confronted its unfunded 20th century promises to municipal workers, some Detroit leaders think they've got a distinct advantage over rival northern cities, especially debt-ridden Chicago and the state of Illinois.

"One of the things Detroit needs to promote is unlike so many other communities, we've cleared our legacy costs," said Eric Larson, CEO of the Downtown Detroit Partnership. "You think about Chicago, which is great competition, but the reality is they have a very significant pension liability that they're going to have to deal with pretty soon. And that's going to be all-consuming, just like it was for us."

Simply put: Detroit already went bankrupt!

And in the process of that historic and tumultuous 17 months in 2013 and 2014, Detroit dumped $7 billion in liabilities in bankruptcy court, mostly through the elimination of an unfunded and generous retiree health care benefit.

Most pensioners received modest haircuts, and a couple of bond insurance companies absorbed the rest of the losses on money Detroit borrowed to obscure its own pension-funding crisis.

The $816 million "grand bargain," an unprecedented infusion of cash from philanthropy, corporations and state government, spared most pensioners from double-digit reductions in their monthly checks.

It also absolved Detroit of making full pension payments until 2024, giving the city a decade to get back on its feet financially as reinvestment into the center city started to pour in.

As state and Detroit officials found out in the years running up to the bankruptcy, the city's inability to borrow money at reasonable rates affected everything from fixing broken infrastructure and ambulances to cash flow for making payroll.

Those are factors any business considering an investment in Detroit had to weigh at the time, Arwood said.

"Detroit can present a completely different picture on the future," said Arwood, CEO of Miller Canfield Consulting, a subsidiary of the Detroit-based law firm Miller Canfield Paddock and Stone PLC.

In evaluating cities, Arwood said, Amazon's brass should be asking, "Does your community have its fiscal house in order?"

"If the answer is no, that could be translated into higher taxes for you," Arwood said. "And you don't know when or how much."

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