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  #621  
Old 04-30-2018, 04:45 PM
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http://www.detroitmi.gov/News/Articl...Se7VTQ.twitter

Quote:
Detroit exits active state financial oversight, achieves full self-governance for first time in four decades
Spoiler:
The State Financial Review Commission, which was created in late 2014 to oversee Detroit’s finances as it emerged from bankruptcy, voted unanimously today to end active oversight after the city delivered its third consecutive audited balanced budget.During its three years of active oversight, the FRC had final decision making power on all city budgets, collective bargaining agreements and contracts larger than $750,000.



The FRC will continue to exist for a 10-year term, although it will play no active role in City of Detroit operations. The city will be required to submit monthly financial reports, and will also submit its adopted budget and 4-Year Financial Plan each year. So long as the city continues to balance its budgets and meet other basic fiscal requirements, the FRC will stay inactive for the rest of its existence.



Not only does the end of active state oversight signal the end of the last vestige of the city’s bankruptcy, it brings to an end a 40-year stretch where some aspect of city government was under the oversight of a state or federal entity, including:

36 years of federal court oversight of the Water & Sewerage Department over environmental issues
A decade of US Justice Department oversight of the Police Department regarding police use of force and lockup conditions.
Nearly a decade of HUD control of the Detroit Housing Commission due to poor performance


With the end of the FRC’s active oversight, Detroit regained the ability to negotiate contracts and make budget changes without the commission’s approval. Mayor Mike Duggan called the end of all active oversight a great milestone in the city’s continued progress and a testament to the city’s new commitment to strong fiscal management.



“For the first time in four decades, Detroit’s elected leadership will be in complete control of government functions,” said Mayor Mike Duggan. “Thanks to the outstanding team we’ve assembled here at the city, the leadership of our partners on Detroit City Council and our hard working city employees, Detroit is once again finally a city of full self-governance.”



The mayor also thanked members of the FRC, appointed by top state officials, for their professionalism and dedication to ensuring fiscal responsibility in Detroit. Not once in its three active years did the commission find cause to veto a budget or contract.



“Today is an important day in the history of our city,” said Detroit City Council President Brenda Jones. “Now, with the dormancy of the FRC and a reduction in state oversight, local control is returning to our city and its elected officials can assume the role that voters expect us to carry out. With five years of partnership under our belt, the legislative and executive branches will continue to work together to ensure Detroit’s financial recovery remains solid. My colleagues and I are committed to conducting the due diligence required to balance the budget, while ensuring that services are delivered to meet the needs of all Detroiters.”



In addition to delivering three balanced budgets with surpluses, the city also has created a 10-year budget forecast to ensure continued stability, garnering the attention of national credit rating agencies, which have significantly upgraded the city’s bond rating.

FRC Oversight

The city’s General Fund balance was up to $592.8 million at the end of FY 2017 vs. a $73 million total fund deficit at the end of FY 2013. Property tax collections increased nearly 10% over the last four years and income tax revenues increased 15 percent over the same period.



“Today marks a milestone for the people of Detroit and the resilience of their city. It wasn’t long ago we entered into the Grand Bargain to lift up a bankrupt Detroit, and over the past few years, the state, city and members of the commission continued to work together to set a framework for success,” Gov. Rick Snyder said. “Today’s vote validates Detroit’s remarkable progress and path toward continued financial stability. Detroit is America’s Comeback City and I have every confidence that we will continue to see Detroit reach new heights under the city’s leadership.”



The path to self-governance in Detroit

Starting in 1977 with federal court-ordered oversight of the Detroit Water and Sewerage Department, the City of Detroit has been under some kind of federal or state oversight. In that period, Detroit faced oversight in seven different areas, including; the Detroit Water and Sewerage Department, the Detroit Police Department, the Detroit Housing Commission, the Detroit Department of Transportation, the Assessment Division, the city’s finances and the entire city under the emergency manager.


Beyond the departure of the emergency manager and financial stability that led to the end of the FRC’s oversight, reforms among the departments and improved efficiencies in city services led to the removal of additional layers of oversight. The Detroit Housing Commission improved financial and management requirements, which led to the commission receiving its first passing HUD inspection score for every public housing development in decades. The Detroit Police Department drastically reduced uses of force and established new offices to review and maintain best practices, leading to the end of the federal monitor at DPD. DDOT improved bus maintenance and improved on-time bus departures to remove the federal oversight of that department. And the Assessor’s Office initiated a city-wide reappraisal initiative in 2014, a process that had not been undertaken since the 1950s.
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  #622  
Old 05-01-2018, 06:05 PM
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https://www.detroitnews.com/story/ne...trol/34408755/

Quote:
Detroit in full control of self for 1st time in decades
Spoiler:
Detroit — The city emerged from state oversight Monday in a historic milestone that ends the last vestige of Detroit’s bankruptcy and marks the first time in four decades that the city has full control of government operations.

The restoration of local control comes as Detroit touts stabilized finances with a projected $36 million surplus in fiscal year 2018, increasing property tax revenues and a plan to have $335 million set aside by 2024 when the city resumes pension payments.

The nine-member financial review commission voted unanimously Monday to release Detroit from the state’s oversight. Since 2014, the commission has had the final say on all city budgets, collective bargaining agreements and contracts larger than $750,000.

More:Howes: City oversight ends, business investment deepens

“Today is one of the most important days that I’ve had since I’ve been on council,” Council President Brenda Jones said after the commission meeting. “It’s an important day for the history of the city of Detroit.”

Jones, who also sat on the commission, praised Mayor Mike Duggan for not vetoing any city budgets and made a promise to continue delivering quality city services to Detroiters. Under the state’s watch, Detroit posted three consecutive budget surpluses, which was a major threshold to regaining independence.

Duggan called the exit from state control a “celebration,” noting some state officials doubted Detroit could achieve financial order in three years.

“This is the earliest we could have done it,” said Duggan, who also sat on the commission. “Today, we have returned self-determination to the people in the city of Detroit.”

Finances in Detroit were the last remaining operation under oversight by state or federal officials. The water and sewerage department was placed under oversight in 1977 for more than three decades over violations of the Clean Water Act.

Other city departments that have been regulated by state and federal entities in the last 40 years include the housing commission, police department, transportation department and assessing department.

While the financial review commission won’t have active oversight, it will still have a “passive monitoring” role, officials say. The city will be required to submit monthly financial reports, along with its adopted budget and four-year financial plan to the commission each year.

The commission will vote on a waiver annually to continue local control in the city. If the city continues to balance its budget and meet fiscal requirements for 10 straight years, the commission will dissolve, officials say.

Detroit ended the 2017 fiscal year with a $53.8 million general fund operating surplus and revenues exceeding expenditures by $108.6 million. The city ended the 2016 fiscal year with a $63 million surplus. For 2015, the surplus was $71 million.

Income tax revenue increased 15 percent in the last four years— it is $292.1 million for fiscal year 2018, up from $253.8 million in fiscal year 2014.

The property tax collection rate has also increased to more than 80 percent in fiscal year 2018 compared to 69 percent in fiscal year 2014. Chief Financial Officer John Hill attributed this to the value of real estate in Detroit going up as more homes are sold and the city attracts residents.

“This is a day that we all had hoped would come,” Hill said of the exit from state oversight. “Nobody knew that it would come this quickly.”

Hill said the city has been working to address the biggest long-term financial risks of its future, such as its pension contributions and debt service expenses.

The funding plan that helped the city exit bankruptcy in December 2014 relieved Detroit of most payments to its two pension funds through 2023. But in 2024, the city will have to start funding a substantial portion of the pension obligations from its general fund for the General Retirement System and Police and Fire Retirement System.

It’s unclear how much those payments will be, Hill said, but the city’s Retiree Protection Fund should have collected $335 million, plus interest, by 2023. So far, $105 million has gone to the fund.

The city’s four-year financial plan from 2019-22 includes a provision of $170 million for the pension funds.

Detroit is also taking action to reduce recurring debt service expenses. The city has used $30 million from surplus to pay down part of its exit financing debt and $52 million of surplus to redeem outstanding C-notes among other actions.

“Our biggest obstacle to dealing with these issues is time,” said Hill of the pension funding. The city has started planning early so there is “a longer period of time in order for us to put whatever plans in place to deal with those financial issues,” he said.

While elected officials celebrated their independence Monday, some residents said Detroit has not progressed in all areas.

Russ Bellant, who was among residents who filed a lawsuit in 2013 challenging the constitutionality of the bankruptcy, said retirees are in a “crisis” following the restructuring.

“The city can claim success, but it’s still on the backs of people who were victimized by the bankruptcy,” he said.

Bellant, a community activist, said the city continues to focus on the development of downtown.

“That part is good, but that’s masking the neglect to the neighborhoods, the neglect of the retirees and the loss of assets that we will never get back.”

Resident Helen Moore said she was glad the city exited state oversight but still believes there are “two Detroits.”

“We don’t live downtown, we live in the neighborhoods, and we are not getting what we deserve,” Moore said during the commission meeting. “I am hoping that all of you here, when you disburse ... will understand that Detroit is in terrible shape.”

City and state officials have predicted for months that Detroit would emerge from state oversight this spring. Duggan credited his administration and the City Council with getting Detroit’s finances back in order.

The city filed for bankruptcy in the summer of 2013 and officially exited on Dec. 10, 2014, with a plan to shed $7 billion in debt and pump $1.7 billion into restructuring and city service improvements over a decade.

In approving a deal that would be known as the “grand bargain,” which helped pave the way for the city to exit bankruptcy in December 2014, Michigan legislators required that a financial review commission oversee the city’s finances, including budgets, contracts and collective bargaining agreements with municipal employees.

The commission was established as a condition of a financial aid package approved by the state Legislature to defray cuts to Detroit retiree pensions and shield the Detroit Institute of Arts collection from bankruptcy creditors.

State Treasurer Nick Khouri, who serves as chairman of the financial review commission, praised Detroit, saying the city has created a “sturdy financial infrastructure.”

“I am confident the city will continue on its path of a balanced budget, strategic investments, improved services and progress in paying down the city’s debt,” Khouri said. “So I am pleased to say this financial emergency is resolved, and I look forward to the city’s continued success.”
https://www.bloomberg.com/news/artic...ncial-recovery
Quote:
Detroit Exits State Oversight as City Mounts Fiscal Recovery
By and
April 30, 2018, 1:26 PM EDT Updated on April 30, 2018, 3:59 PM EDT
Financial Review Commission votes to end Michigan’s oversight
Once-bankrupt city achieved three straight years of surpluses
Spoiler:
Detroit exited years of state financial oversight Monday, showing the city has made strides toward reversing the long economic and fiscal decline that pushed it into a record-setting bankruptcy.

Michigan’s Financial Review Commission, set up in 2014 to monitor Detroit, voted unanimously to end its oversight of a city that officials said has been under some form of outside supervision since 1975. The vote, which came after Detroit ran three years of budget surpluses, drew applause from residents and activists who attended the meeting in the city’s downtown.

No one expected Detroit to move out of state supervision within three budget years, the soonest time available, according to Mayor Mike Duggan.

“I don’t think anybody expected us to work together so well,” Duggan said Monday before the commission’s vote. “This has been a great collaborative effort.”

Detroit has slowly been on the mend since it eliminated $7 billion of debt in bankruptcy, allowing it to arrest a downward spiral that resulted from decades of population loss, declining tax revenue and the disappearance of automobile-industry jobs. With the economy improving, Detroit’s income-tax collections rose 8 percent in 2017, while rising home prices this year lifted the assessed value of property for the first time in at least 17 years.

“There’s much to do, but much has been accomplished over the last three and a half years,” Michigan Treasurer Nick Khouri said after the commission’s vote. "The progress has been nothing but amazing."

To keep the recovery going, Detroit needs to continue revitalizing neighborhoods left blighted by vacant homes after residents moved out for decades. The population fell to 673,000 in 2016, down about 6 percent from 2010, according to data from the U.S. Census bureau, and more than a third of its residents live below the poverty line.

Detroit Chief Financial Officer John Hill said in an interview ahead of the vote that the panel will still continue reviewing the city’s financials because it will be required to formally waive its oversight annually for the next decade. Moreover, he has said Detroit may not return to the bond market to issue general-obligation bonds -- which cities routinely sell to fund public works -- until two to three years from now.

Given the losses that investors took in bankruptcy, even that may be optimistic, said Gabe Diederich, portfolio manager for Wells Fargo Asset Management, which oversees about $40 billion of state and local bonds, including what was formerly Detroit water and sewer debt.

“The city continuing on a step ladder toward improvement, that is a very good thing for their citizens and I think investors,” Diederich said.

"But the economic conditions in Detroit, while improved, still don’t convey material strength,” he said. “While the core has gotten better, you still are surrounded by a ring of pretty distressed areas.”

A full recovery for a municipality the size of Detroit may take more than a decade, said James Spiotto, managing director at Chapman Strategic Advisors, which advises on financial restructuring. The city needs to reinvest, focus on economic development and attracting businesses and residents, he said.

“You’ve got to stay the course,” Spiotto said. “You’ve got to keep fiscal responsibility as a key issue.”

Sandy Baruah, president and chief executive officer of the Detroit Regional Chamber, a business group, is optimistic. He said investment has increased because the private sector is “voting with their feet” and checkbooks.

“When I moved here in 2010, downtown was pretty much dead all the time,” Baruah said. “Now it’s pretty much vibrant all the time. It’s a pretty significant change.”

While parts of Detroit are thriving, others are still economically-depressed and crime-ridden, said Luther Keith, executive director of Arise Detroit, a neighborhood community group. There’s still a “significant number” of residents who feel the progress hasn’t come to their block because the improvements aren’t as widespread as they should be, he said.

“We have not recovered,’’ Keith said. “We have not completed the comeback. We are coming back. There are signs of that, but we still have huge, huge issues that we are confronting, but we are moving the needle in the right direction.’’


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Old 05-04-2018, 11:12 AM
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http://www.governing.com/week-in-fin...oversight.html

Quote:
The Week in Public Finance: Detroit May Be Out from Under State Oversight, But Its Problems Are Far From Over
The Motor City still has massive debt and pension obligations. Remaining independent will involve a precarious balancing act.
Spoiler:
Less than five years after it declared what was then the largest municipal bankruptcy in history, Detroit emerged from state financial oversight on Monday. But the milestone is largely a symbolic one: The Motor City is still deeply troubled.

There's no question that Detroit has improved. The city has reported balanced budgets in each of the past three years, a big turnaround from the years leading up to its $18 billion bankruptcy. But a big part of that success is because it was able to unload $7 billion of its liabilities during the bankruptcy process. That deal also gave the city temporary pension payment relief, meaning its current budgets don’t include the full cost of the city’s retirement obligations.

Detroit officials say they're focused on preparing to resume debt and pension payments in 2024. The city is projecting a $36 million surplus this year, thanks in part to increasing property tax revenues. Those trends play a big role in officials' plan to have $335 million set aside by the 2024 deadline to restart payments.

RELATED
Bankrupt Cities, Municipalities List and Map In Scranton, Pa., Fiscal Progress Comes With Political Costs How Did America's Richest State Become Such a Fiscal Mess? The Story Behind San Bernardino’s Long Bankruptcy Bankrupt Cities? What About Distressed Cities?
Still, notes S&P Global Ratings, the current balance is fragile: “The city's challenge will be to manage these rising costs in relation to economic growth, and the costs the city incurs to support [that] growth."

One such cost the city is grappling with when it comes to growth is blight removal. Bankruptcy may have helped the balance sheets, but it didn’t change Detroit’s physical problem. Thanks to the half-century of population decline, entire neighborhoods have been practically abandoned, thus making it difficult and expensive to serve the remaining spread out, isolated pockets.

What's more, to spur reinvestment in abandoned neighborhoods, the city is spending millions to raze vacant buildings. It cost the city nearly $70 million last year and is projected to cost more than $150 million in 2018 and 2019. Seeing as Detroit’s total general fund budget is about $1 billion, these are no small considerations.

Given these concerns, some think the city’s emergence from oversight was incredibly speedy. By comparison, Flint, Mich., which never went into bankruptcy, was under state receivership for more than six years, and some cities in Pennsylvania have been under state oversight for decades. Rather than suggestive of an actual turnaround, municipal analyst Matt Fabian suggests the exit from oversight shows "that the state continues to value a narrative of quick rebound versus evidence that [one] can be sustained."

Too speedy or not, the decision this week to release Detroit from oversight is significant in a larger sense: Since 1977, at least one city agency has been subject to some kind of oversight by a government entity. With Monday's announcement, it's the first time in more than 40 years that Detroit’s elected leadership has complete control of government functions.

To remain independent, most agree that leadership and disciplined spending will be key. On that last item, S&P happily notes that Detroit's revenue forecasts are conservative and don’t assume increases from economic expansions that have been announced or are already in progress.

Observers are further encouraged by the city's economy: Quicken Loans and Ford Motor Company have been investing hundreds of millions in business operations in the city. On the same day Detroit exited from state oversight, the Ilitch family -- owners of the fast food pizza franchise Little Caesars, among other things -- unrelatedly confirmed plans for another $200 million investment in the city.

"Capital goes where it’s invited and stays where it’s welcomed," Detroit News columnist Daniel Howes, who credits Mayor Mike Duggan and the city council, recently wrote. "Right now, Detroit is showing a refreshing ability to do both: to attract investment by business leaders who know the city, its leaders and its foibles best."

But, notes Fabian, elected officials come and go. "Not only is the path forward threatened with each election cycle," he says, but the state is unlikely to intervene with any more aid if the city’s recovery hits a setback. "Going forward,” he says, “the city is likely on its own."
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Old 05-26-2018, 05:16 PM
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https://www.detroitnews.com/story/ne...oit/634145002/

Quote:
Detroit gets credit rating upgrade

Spoiler:
Detroit — Giving a nod to the city's improving financial reserves, Moody's Investors Service on Tuesday announced an upgrade in Detroit's issuer rating and its outlook.

The rating comes just weeks after the city emerged from the strict financial oversight put in place as it exited bankruptcy in 2014. The city regained local control over its budgeting and contracts with a projected $36 million surplus in fiscal year 2018, increasing property tax revenues and plans that will earmark $335 million by 2024 to deal with payments that will come due to its two pension funds.

Besides upgrading the city's issuer rating, Moody's also revised its outlook to stable from positive. The upgrade does not apply to any of the city's $1.9 billion in outstanding debt.

Moody's said its upgrade reflects an improvement in the city's financial reserves, which have allowed Detroit to implement a funding strategy for its looming pension obligations "that will lessen the budgetary impact of a future spike in required contributions."

Under the terms of the debt-cutting bankruptcy plan, the city must pay $20 million annually through the 2019 fiscal year to its two pension funds. Its contributions will increase significantly beginning in 2024.

"The stable outlook is based on the city's strong preparation for challenges ahead including the need to make capital investments and absorb pending spikes to fixed costs," Moody's wrote. "Underperformance of pension assets and revenue volatility remain notable budgetary risks, but the city has amassed a large reserve cushion and adopted conservative budgetary assumptions that provide breathing room to respond to adverse developments."

Detroit's Chief Financial Officer John Hill celebrated the positive action on Tuesday, noting the city's hard work to get its financial house in order.

“A second rating upgrade in just seven months from Moody’s shows that we have created the financial management infrastructure necessary to continue to meet our obligations and enhance our fiscal position,” Hill said in a released statement. “Working with the mayor and City Council, our team has made a variety of improvements to financial management practices and our financial planning and budgeting practices are strong, as reaffirmed by Moody’s in their report.”

The upgrade, Moody's added, also factors in "ongoing economic recovery that is starting to show real dividends to tax collections."

Further growth in the city's reserves and tax base growth to fund capital projects for either the city or its school district could lead to additional upgrades. A downgrade could be spurred by slowed or stalled economic recovery, depletion of financial reserves or growth in the city's debt or pension burden, fixed costs, or capital needs, Moody's warns.


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  #625  
Old 07-16-2018, 07:32 AM
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https://www.foxbusiness.com/markets/...born-at-a-cost

Quote:
5 years after declaring bankruptcy, Detroit reborn at a cost
Spoiler:
It's been five years since Detroit bottomed out after decades of decline, admitting in the largest U.S. municipal bankruptcy filing ever that the country's one-time industrial engine could no longer pay its bills.

The turnaround since then has been remarkable, with major investments that have brought new jobs, the rebirth of neighborhoods whose best days were half a century ago and the restoration of street cleaning and lighting — services so basic yet important to a sense of community. It also cost some people more than others.

Jean Estell, 65, worked about three decades in Detroit's recreation and public works departments before retiring in 2004. Like other retirees, she lost part of her pension and all of her retiree health coverage in the bankruptcy settlement with creditors, and she's worried about being left behind in this new Detroit.

"I'm glad we're doing better. I want us to do better," Estell said of the city. "But it looks like somewhere or other they can find some money and give us our money back. At least some of it."

Before the bankruptcy settlement, she received about $2,300 per month. Estell said she gets about $63 less per month from her pension and now has to pay for her own health care. Prescription co-pays that once were $3 now are $25 for some of the roughly eight medications she takes, and her doctor visits cost more, too.

"I don't go as often as I should. You get sick and you suffer through it," she said.

Given where Detroit stood five years ago, things could be worse for the city's roughly 670,000 residents, including current and former city workers affected by the settlement, said James McTevia, a turnaround expert and managing member of McTevia & Associates in suburban Detroit.

"Before Detroit sought the protection of the courts to resolve its financial problems, the citizens — who are the real people that count — were in a lot worse shape than they are now," he said. "Before the bankruptcy, the citizens were not getting the services they deserved. They were having trouble with water, sewer, garbage, feeling secure."

Indeed, when state-appointed emergency manager Kevyn Orr filed for Chapter 9 protection for Detroit on July 18, 2013, residential streets hadn't been swept in about three years and the city was well on its way to tearing down thousands of homes abandoned during the exodus of more than a million people that began in the 1950s.

With its tax base decimated, Detroit's faced $14 billion in long-term debt and a $327 million budget deficit in 2013. City workers, including police and firefighters, had their pay cut. Employees were forced to take unpaid days off.

Detroit emerged from bankruptcy in December 2014, having restructured or wiped out $7 billion in debt. The city was forced to follow a strict spending plan and has been able to build cash surpluses while posting three consecutive years of balanced budgets.

Weeks after Detroit was released from active state oversight, Moody's Investors Service upgraded the city's credit rating this spring — the third upgrade in less than three years.

"Since Detroit came out of bankruptcy, there have been billions of dollars spent in Detroit," McTevia said. "People that were once fearful in investing in the city just fell over themselves to invest in Detroit. If you go to Detroit now, it's a different city than it was five years ago. It has a different image and it is a vibrant city."

At Fred's Key Shop, a family-owned Midtown locksmith that has been in business for more than 50 years, workers have seen the change. Fred's is a few blocks from a year-old professional hockey and basketball arena and a planned commercial, residential and entertainment district.

"We're busier than ever," said office manager Bryan Knoche. "More people are moving into Midtown and that means more business to be had. There also weren't fancy restaurants five years ago. There's definitely a lot of money coming into the area and people coming in from New York and L.A."

So far, such opportunities have eluded former Detroit business owner Steve Brown.

Brown, 58, said he once had 15 employees and contracted with Detroit to help repair streets. Now he works for his father's trucking company.

The contract and the bulk of his work ended after the city entered bankruptcy. Brown said he considered switching over to demolition work, but had trouble getting a loan to buy the equipment.

"I didn't have enough funds to get started like I wanted to," he said.

Some parts of the city, like downtown and the Midtown cultural district, had been on the upswing before the bankruptcy filing but many broken neighborhoods still suffered. Savings from the bankruptcy has allowed Detroit to spend more to improve quality of life. Street sweeping resumed last year, and Detroit has thousands of new street lights. Police and paramedics show up more quickly when 911 is called.

Investors are building hundreds of apartments, condominiums and homes in and around the downtown area. The city, along with philanthropies and nonprofits, is fixing up older homes.

There's still room for improvement.

Alice Holland, who lives in Brightmoor, said crews cut the high grass in vacant lots but don't clear enough of the illegally dumped trash from the neighborhood, which clogs drains and causes streets to flood during strong storms.

"You'll see me ... taking my stick and cleaning out the drains," she said. "I like the city and what's going on. You can fix up downtown, but fix up the neighborhoods, too."
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Old 07-16-2018, 08:34 AM
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The woman who retired at 51 and is now 65, still getting 97% of her pension and paying much less for her healthcare than what most people pay, may not be the sympathetic character that they were looking for. JMO.

Regardless, I have a number of friends in Detroit, plus a few business contacts that are from there, and keep getting reports about how well it's doing, with people moving back and lots of jobs, etc. Not sure what that means for their overall finances, but the rumblings sound pretty favorable. Like, the bk did what it's supposed to do.
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Old 07-16-2018, 10:29 AM
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Oh, I know.

That's similar to the MEP bailout hearings.

Yes, it sucks that your pension will get cut. That has happened to others as well, but at least in the case of MEP retirees, they can get Social Security.... if they were at least 62.
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Old 07-19-2018, 03:28 PM
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https://www.detroitnews.com/story/ne...eal/772729002/

Quote:
After Detroit bankruptcy: Optimism, but 'challenges are real'
FIVE YEARS AFTER DETROIT'S HISTORIC BANKRUPTCY FILING, THE CITY HAS RISEN FROM FINANCIAL RUIN TO A PROMISING FUTURE FEW COULD HAVE PREDICTED
Spoiler:
Five years after Detroit's historic bankruptcy filing, the city has risen from financial ruin to a promising future few could have predicted.

Officials say the city now has its financial house in order, posting four consecutive years of balanced budgets while crafting a plan to stave off another collapse by addressing looming pension obligations.

That upswing has allowed the city to regain full control of government operations after it emerged this spring from strict state oversight put in place as a provision of its restructuring plan. City officials have touted improved services, including the installation of 65,000 new LED streetlights and better trash pickup, public safety response and bus service.

"There’s a sense of optimism in Detroit like I’ve never seen before in my life," said retired U.S. District Chief Judge Gerald Rosen, who is credited with pulling together a funding plan that helped speed Detroit's bankruptcy exit.

"The challenges are real though. Nobody is minimizing the challenges."

That funding plan that was key to Detroit’s bankruptcy exit — known as the “grand bargain” — relieved the city of much of its financial obligations to the city's two pension funds through 2023.

Bicyclists peddle across State Street along Woodward Avenue in downtown Detroit earlier this month.
Bicyclists peddle across State Street along Woodward Avenue in downtown Detroit earlier this month.
(Photo: David Guralnick, The Detroit News)

The deal, designed in part to lessen retiree pension cuts, pumps the equivalent of $816 million into the city's pension funds over 20 years through contributions made by private foundations, state taxpayers and private donors to the Detroit Institute of Arts.

But in 2024, Detroit will have to start funding a substantial portion of its pension obligations from the city's general fund.

In response, Mayor Mike Duggan's administration put together a protection fund, he said, "to make sure that our employees never again face pensions being cut."

"We're running a balanced budget and putting money aside to make sure that never happens again," he said. "It shouldn't have happened the first time."

By 2024, the city expects to have deposited $335 million into what's been coined the Retiree Protection Fund, which is a designated account to help offset the future contributions. City officials already have set aside more than $100 million.

A portion of the funds accumulated in the trust will be used each year from 2024 through 2033 to offset the annual contribution coming out of Detroit's general fund.

The administration projects that city revenues will have sufficiently increased by the time the general fund is responsible for covering the first payment of $143 million on its own in 2033.

The city's funding mechanism — to cope with the annual future payments into the Police and Fire Retirement System and General Retirement System — has earned Detroit higher marks in the bond and credit markets and among state leaders.

If earnings meet the bankruptcy plan’s assumed return rate, the city’s contribution in 2024 from its general fund would be $143 million. But if there are no earnings, the city's required payment could soar to $344 million or more. The contributions would be annual and could continue for 20-30 years, based on projections.

Detroit's population was 673,104 as of last summer, a decline of 2,376 residents.
Detroit's population was 673,104 as of last summer, a decline of 2,376 residents.
(Photo: Daniel Mears, The Detroit News)

Pain and gain

The Motor City's comeback story isn't without pain, both supporters and critics of the city's restructuring say.

Concessions taken during the city's Chapter 9 filing on behalf of active workers and retirees continue to devastate some.

Laverne Bronner-Wilson retired in 2016 after working for 32 years for Detroit’s Human Resources Department. She started a new full-time job as a secretary a few weeks later.

“I had to get a job because with the bankruptcy, it eliminated my health care,” said Bronner-Wilson, 56, who lives in Garden City. “I didn’t want a lapse in insurance coverage. Some people are paying $700 to $800 a month in insurance coverage.”

The city got out from under its $4.3 billion retiree health care liability by creating independent health care trusts, known as Voluntary Employee Beneficiary Association, or VEBA. One trust is for general retirees, another is dedicated to police officers and firefighters who retired by Dec. 31, 2014.

Detroit dropped its traditional health insurance plan for retirees not eligible for Medicare in spring 2014. Instead, retirees and survivors were provided a monthly stipend, based on income level.

Bronner-Wilson said she doesn’t believe the health care concessions were justified.

“I’m not satisfied,” she said. “It didn’t have to be as bad.”

The city is still grappling with poverty and violent crime rates that remain among the highest in the nation. It's also faced with a troubled school system and lags in neighborhood recovery and inclusion.

East side resident Jay Henderson said growth has been noticeable in the downtown and Corktown, but improvements haven’t reached his neighborhood.

“Currently, it hasn’t affected us at all,” said Henderson, 65, who is president of the Riverbend Community Association. “It’s supposed to be coming. We haven’t had any gigantic groundbreakings. That generates growth right there. Everybody wants to move to an area like that.”

Changing core

In contrast, the city's Midtown is "booming" with apartment building and condos, said Pat Felder, who has lived there for 30 years and believes Detroit is "on a comeback."

The city's core is transforming with the addition of the $863 million Little Caesars Arena in Midtown, and a planned 50-block entertainment district as well as $1 billion mixed-use development underway at the former Hudson's site downtown. Further out, the historic Michigan State Fairgrounds could one day become the home of a major employer, a regional transit hub and provide amenities to residents as developers and the city see use for the large property.

"I feel as though Detroit is coming back. When people come to visit people they say, ‘I haven’t been here in a long time, and it’s really improved,’” said Felder, a member of the Virginia Park Block Club Association. “I have seen ups and downs, but I think we’re on the right track. I know it’s going to take a lot of time.”

Construction is underway at the Hudson's building site
Construction is underway at the Hudson's building site in downtown Detroit.
(Photo: David Guralnick, The Detroit News)

Former U.S. Bankruptcy Judge Steven Rhodes, who presided over Detroit's bankruptcy case, said the city’s ability to maintain balanced and surplus budgets since its bankruptcy and restore basic city services is impressive and creating an environment for economic development.

“Investment is coming into the city from all over the world, and the city has a reputation now as an attractive place to invest,” said Rhodes, who signed off on Detroit's exit plan in November 2014.

Since Mayor Mike Duggan took office in 2014, EMS and police response times have been cut by more than half. EMS has gone from an average response time of 18 minutes to about 8 minutes, and police dropped from 30 minutes to about 12 minutes, according to Duggan's office.

The city has replaced much of its aging fleet of buses, and its Department of Transportation has undertaken a major service expansion, adding 10 24-hour and express routes from city neighborhoods to its downtown core.

Detroit’s council signed off on agreements in 2014 that privatized the city’s garbage pickup. The move was designed to save the city $6 million, improve services and remove Detroit’s burden of finding adequate staff and funding to invest in repairs to its aging fleet. The emergency manager-led deals also instituted curbside recycling and bulk pickup every two weeks, instead of quarterly.

Thinking ahead

Detroit has fared well in its financial path out of bankruptcy, state and city officials say.

A surplus of $44 million is projected for the 2018 fiscal year, Detroit's Chief Financial Officer John Hill said. That follows several years of similar positive results.

The city ended its 2017 fiscal year with a $53.8 million general fund operating surplus, and revenues exceeding expenditures by $108.6 million. In the 2016 fiscal year, the surplus was $63 million, and it was $71 million for 2015.

Hill said five years ago the city was just trying to manage what was in front of it. Now, it's budgeting out further and doing what it can now to minimize the impact of future obligations, including pension and debt service payments.

Income tax revenue increased 15 percent in the last four years — it's $292.1 million for fiscal year 2018, up from $253.8 million in fiscal year 2014.

A QLine Detroit streetcar departs the Sproat Street
A QLine Detroit streetcar departs the Sproat Street station as the car passes Little Caesars Arena.
(Photo: Todd McInturf, The Detroit News)

The property tax collection rate has also increased to more than 80 percent in fiscal year 2018 compared to 69 percent in fiscal year 2014, according to the CFO's office. The collection rate was about 79.8 percent for 2017, officials said.

State equalized and assessed property values may be up, but taxable value changes for Detroit have been "marginal," says Detroit Treasurer Christa McLellan, noting income tax, not property tax, is a major revenue source for the city.

The 2018 tax year was the first that Detroit has seen an increase in taxable value in at least a decade, she said.

As a result, the city assumes it will collect $124 million in fiscal year 2018 compared with $129.4 million in fiscal year 2014 as taxable valuations change.

Those collections, officials note, consist of multiple sources including assessments for the current tax year, delinquent real and personal property tax from a Wayne County revolving fund, county auction proceeds and personal property tax reimbursements from the state.

Read more: Detroit bankruptcy 'threw everything into chaos' for retirees

Read more: Howes: Five years after bankruptcy, Detroit shows real gains

Read more: Bankole: After bankruptcy, Detroit retirees feel deprived

'Things are looking up'

Meanwhile, May data from the U.S. Bureau of Labor Statistics showed 227,894 Detroiters were employed. The figure jumped 1,690 from the month prior and 21,326 from January 2014, when Duggan took office.

"Things are looking up. More Detroiters are employed now," Hill said. "That’s part of what we believe is driving our increase in (income) tax collection."

Detroit’s labor force also grew by nearly 3,000 residents in May. The unemployment rate for May was 7.9 percent, down from nearly 18 percent in January 2014.

The administration has credited the improvements to city job training and placement efforts.

Laura Che and Stella enjoy the cool water with the Detroit skyline from Belle Isle in Detroit on Tuesday. Michigan born Laura Che is back visiting from California: "I had to come back and have a Michigan summer. Oh my gosh, I love this area, they let me bring my dog on a leash. Since the bankruptcy, there has been improvement; it was in a very sad decline."
Laura Che and Stella enjoy the cool water with the Detroit skyline from Belle Isle in Detroit on Tuesday. Michigan born Laura Che is back visiting from California: "I had to come back and have a Michigan summer. Oh my gosh, I love this area, they let me bring my dog on a leash. Since the bankruptcy, there has been improvement; it was in a very sad decline."
(Photo: Daniel Mears, The Detroit News)

Hill said the city has multiple safeguards in place to ensure it doesn't slip back into insolvency. Among them, Detroit is conservative in its projections and doesn't budget income until it comes in.

Due to the city's financial responsibility, a nine-member financial review board unanimously voted in April to release Detroit from oversight. Until then, the board had the final say on city budgets, collective bargaining agreements and contracts over $750,000.

As a nod to Detroit's improving financial reserves, Moody's Investors Service in May announced an upgrade of the city's issuer rating and outlook.

David Levett, a senior analyst and vice president for Moody's, said Detroit has made great progress in planning for upcoming challenges, namely its pension obligation. But still there are no guarantees.

“The city has done a lot of planning for that cliff, so to speak. But it’s not like the issue has completely gone away," he said. "The remaining risk is assets could perform lower than expected in those plans, or it could be more volatile returns."

'It needed to be done'

Gov. Rick Snyder said he hoped July 18, 2013, would go down as the lowest day in Detroit's history.

Saddled with $18 billion in debt, unable to pay its bills or provide basic services, that's when the governor authorized the city to file the largest municipal bankruptcy in U.S. history.

"It was an opportunity to bring the city back," Snyder told The Detroit News in a recent interview. "It needed to be done."

Detroit's bankruptcy was the culmination of a half-century of residential flight, a dwindling tax base, deferred investment and financial mismanagement.

"Citizens of Detroit were not getting the services that they deserved because of the crushing burden of all the historic debt," said Snyder, noting streetlights were out, trash wasn't being picked up and emergency response times lagged.

"People tend to forget. They think it was a quick situation. It wasn't."

Even though empty homes are boarded up, the lack of
Even though empty homes are boarded up, the lack of residents overseeing the property or neighboring homes doesn't prevent illegal dumping on Central near Joy in west Detroit.
(Photo: Daniel Mears, The Detroit News)

Struggling financially, Detroit entered into a consent agreement with the state in spring 2012. By the following February, a review team concluded the city failed to restructure its debt or come up with a viable plan to resolve its money problems, prompting Snyder to sideline then-Mayor Dave Bing and the City Council with the appointment of emergency manager Kevyn Orr, who declined to comment for this story.

Bing, who took office amid a $330 million accumulated deficit, said his goal was to change the direction of the city. In his first three years as mayor, Bing was forced to make "very ugly decisions." Among them — scaling back benefits and cutting salaries by about 10 percent.

"It was obvious we were already bankrupt," he said. "We had just not filed for bankruptcy."

Detroit's nearly 16-month journey through municipal bankruptcy helped it drop $7 billion in debt, restructure another $3 billion and pump $1.7 billion more into service improvements over a decade.

The city's landmark debt-cutting plan also slashed $7.8 billion from payments to retired workers and allowed Detroit to escape $4.3 billion in retirement health care benefits.

Detroit general retirees took 4.5 percent cuts to their base pension and lost an annual cost-of-living increase under the city's plan, while public safety retirees' pensions remained intact but their cost-of-living adjustments were reduced.

Snyder said "nobody wanted to do any of that," but it was necessary to get the deal done.

"This was complex and complicated," he said. "Everyone needed to give something."

Doug Bernstein, a bankruptcy lawyer at Plunkett Cooney in Bloomfield Hills, said the city's Chapter 9 case was resolved more quickly than many smaller bankruptcies, and was more successful.

"But you don't discount the people who were actually hurt by it. In every bankruptcy, somebody is going to get hurt to a certain extent," he said. "It will never seem fair or a success to them, and I get it."

A ways to go

The biggest success of Detroit's bankruptcy, Rhodes said, was getting the city, its political leaders and residents to focus on the necessity of proper budgeting and restoring municipal services.

But the schools remain an "enormous" challenge, said Rhodes, who formerly served as the city school district's transition manager.

Detroit Public Schools Community District has a new superintendent and school board members who are enacting sweeping reforms to address academics, attendance and teacher shortages. But there's still a ways to go.

"As I said when I confirmed the plan, and I think it’s still true today, that Detroit's recovery will not be complete until families are comfortable moving into this city because they are comfortable with the education their children will get in the public schools in the city," he said.

Retired bankruptcy Judge Steven Rhodes, from left, retired U.S. District Court Chief Judge Gerald Rosen and Gov. Rick Snyder gather Wednesday afternoon at 4:06 p.m. at Republic Tavern on Grand River in Detroit to reflect on Detroit's historic bankruptcy filing five years ago at that exact time.
Retired bankruptcy Judge Steven Rhodes, from left, retired U.S. District Court Chief Judge Gerald Rosen and Gov. Rick Snyder gather Wednesday afternoon at 4:06 p.m. at Republic Tavern on Grand River in Detroit to reflect on Detroit's historic bankruptcy filing five years ago at that exact time.
(Photo: Max Ortiz, The Detroit News)

Detroit's population loss has slowed, meanwhile, to a 10th of its pace the previous decade, but the city has yet to post a rebound from a decline that began after 1950, U.S. Census Bureau estimates showed in May.

Detroit's population was 673,104 as of last summer, a decline of 2,376 residents. The drop is close to the previous year's loss of 2,770.

Bing himself noted the positive turnaround of Detroit's downtown, Midtown and Corktown. But residents in many city neighborhoods are "still floundering, figuring out how they come back."

"We have not really done much in helping a lot of our neighborhoods, and that's where our focus has to be," Bing said. "We talk a good game, but there's no follow-through."

The Duggan administration has targeted several neighborhood corridors for redevelopment with $42 million from the Strategic Neighborhood Fund. This spring, Detroit announced plans to raise an additional $130 million to continue revitalization efforts in seven other Detroit districts.

Minority inclusion

Bing also has often been critical over a lack of minority inclusion in the city's turnaround.

The issue is still of central concern, some of which played out this month in front of Detroit's City Council as members grilled the city's administration and its land bank over whether enough is being done to ensure minority and city-based firms are getting fair access to millions worth of demolition work.

"There's still a lot of anger with a lot of people," Bing said. "We need to make sure we are including, as best as we can, as many people in these neighborhoods that decided to stay here for the tough times."

Wage and benefit reductions prior to and through the bankruptcy have hit the city's police force particularly hard, says Detroit Police Officers Association President Mark Diaz.

Diaz said he's worried about the city's future outlook if it can't stem the tide of police departures. Detroit has lost more than 800 officers to other departments offering more competitive wages and benefits since 2014, including 133 this year alone, he said.

Downtown development along Woodward Avenue includes
Downtown development along Woodward Avenue includes the QLine.
(Photo: David Guralnick, The Detroit News)

Diaz said today there are 1,600 officers answering runs, down from about 2,000 during the city's bankruptcy.

"The problem we have today comes down to attrition," he said. "We're losing officers as a result of what happened in bankruptcy."

Duggan said police officer retention is a top priority and some progress has been made. Starting pay coming out of bankruptcy had been $31,000, and now it's $38,000, he said.

"We are still losing too many officers, but we are hiring more than we're losing and continuing to put more officers on the street," he said.

Duggan said the city will continue to reopen contracts to improve pay, noting a recent wage increase for Detroit police command officers. But said the city has 9,000 workers and he has to consider them equitably.

"What we continue to do is try to raise our employees' salaries as fast as we can responsibly," he said.

For Duggan, the biggest concern right now is high car insurance rates. It's an issue he's worked to address that's carried over from his first term. He intends to continue to push in favor of getting a "driver's choice" auto insurance reform plan through, he said.

Rhodes said Detroit's recovery will take decades, and that assumes the leadership of the future will have the same focus Duggan and his staff have demonstrated.

"Ultimately, the fiscal welfare of the city and the city's ability to provide adequate municipal services is a responsibility of the residents themselves," he said.

"In our democracy, it is true that our political leaders are responsible for the decisions they make, but we are responsible for the politicians that we elect."
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https://www.detroitnews.com/story/bu...tcy/792784002/

Quote:
Howes: Five years after bankruptcy, Detroit shows real gains
Spoiler:
At 4:06 p.m. Wednesday, people involved in Detroit’s historic bankruptcy will gather at Republic Tavern on Grand River to mark the event that changed the city’s trajectory.

They’ll likely greet old friends, their bonds forged in the crucible of high-stakes negotiations. They’ll tell stories. And it’s probably safe to say Chief Mediator Gerald Rosen, a now-retired federal judge, will recount the “grand bargain” that helped speed a consensual settlement of the largest municipal bankruptcy in American history.

But the celebration belongs to the city itself. It belongs to residents who persevered darker times marred by dysfunction and corruption at City Hall, to pensioners forced to surrender a portion of their expected benefits in a process that threatened to mire the city in years of litigation, to business leaders who invested before the downward spiral accelerated.

Five years to the day after the city’s lawyers filed for Chapter 9 bankruptcy, Detroit’s reinvention is tracing a decidedly upward arc. It’s produced four balanced budgets, received three credit upgrades, improved delivery of basic city services, imposed fiscal discipline and attracted billions in private-sector investment.


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“It’s Detroit’s big-bang theory,” Rosen said, “unrelated people and events colliding together in the same space to overcome distrust, cynicism, self-interest and the ghosts of Detroit’s past mistakes … to help rescue an iconic American city.”

New street lights glow every night across broad swaths of the city. Renovation is creeping outside the so-called "seven-point-two" — the 7.2-square-mile patch of downtown and Midtown proving magnets for both Big Money and smaller plays for restaurants and bars, retail and housing. An estimated 10,000 new housing units are planned or under construction.

Hometown automakers are delivering a lengthening string of record, or nearly so, profits in North America, thanks to a growing national economy. General Motors Co. is an acknowledged leader in development of self-driving vehicles, and rival Ford Motor Co. plans to overhaul the 105-year-old Michigan Central Depot in Corktown and use it to anchor a campus devoted to mobility, autonomy and electrification.

Read more: Bankole: After bankruptcy, Detroit retirees feel deprived

Read more: Mike Duggan: Mayor instrumental to Detroit's turnaround

"The momentum continues to build," said Dan Gilbert, chairman of Quicken Loans Inc. and its family of affiliated companies. "These things tend to be geometric. You're seeing it daily. When you start seeing buildings being erected" on the J.L. Hudson's site and the Monroe block, "it's going to bring a whole new sense of optimism here."

All of that, and more, are combining to revise the narrative about the nation's longtime poster child for disinvestment, de-industrialization and decline. By almost any measure, that’s success — especially for a city so much of America, even Michigan, gave up for dead.

Dan Gilbert.
Dan Gilbert. (Photo: Clarence Tabb Jr. / Detroit News)

"The discussion before the bankruptcy was when is the city going to implode," said Bill Nowling, press secretary and adviser to former emergency manager Kevyn Orr, who returned to Jones Day's Washington office. "Now it's how far can the city go, and what's next? That's the biggest tell that the bankruptcy made a difference."

Did the case that threatened to pitch the city into protracted legal battles with creditors and city pensioners, with the city-owned Detroit Institute of Arts, make the city's continuing reinvention possible? Probably not by itself, because municipal bankruptcy by definition is a restructuring of the city's balance sheet, chiefly debt owed to creditors.

Detroit owes its new status as one of the hottest major cities in America to the confluence of people, circumstances and leaders who recognized both the downside risks and upside opportunities the bankruptcy could help deliver. Refinanced debt that would lessen the city's financial burden; rationalized operations that could more reliably provide city services; stable management under a new, business-oriented mayor that would encourage investment.

"The biggest advantage" of bankruptcy, Mayor Mike Duggan said in an interview, "is we're not having any trouble managing our finances. We've gotten predictable. Things like if you want to build housing in the city with city support ... everybody knows the rules: 20 percent's going to be affordable, and if you're willing to do it, there will be a package of incentives. It's the predictability."

And the leadership, a critical component to post-bankruptcy momentum. In a region accustomed to decades of bickering between city and suburb, union and management, black and white, Republican and Democrat, the bankruptcy five years on stands as an example of Rosen's "people colliding together" to find common solutions to decades-old problems only getting worse with time.

Detroit Mayor Mike Duggan: Our two-term mayor is honoredBuy Photo
Detroit Mayor Mike Duggan: Our two-term mayor is honored for his efforts to help bring the city out of bankruptcy, continue growth downtown, and his long-term plan to revitalize the entire city of Detroit. (Photo: Clarence Tabb Jr., The Detroit News)

A Republican governor who didn't act like a typical Red-State Republican; a Democratic mayor who prized pragmatism and results over ideology and politicking; mediators under Rosen who understood the stakes and tried, like U.S. District Judge Victoria Roberts, to make sure the city's union leaders did, too.

That's not all. President Barack Obama's Justice Department in the person of U.S. Attorney Barbara McQuade launched a roll-up of public corruption that jailed a Detroit mayor, Kwame Kilpatrick, convicted a one-time City Council member, Monica Conyers, and successfully targeted corrupt officials in Wayne and Macomb counties.

The legal crackdown cannot be underestimated for its positive effect on civic morale and business confidence. It's reassurance that someone is willing to police the pols — even if many of them hail from the same political party. That's not insignificant.

"We've seen an accentuation of responsibility," said Rip Rapson, CEO of the Kresge Foundation, a major financial backer of the grand bargain. "The transformation from despair to holding pattern to progress is remarkable."

It's not unnoticed, either. A new normal is setting in: business that for decades decamped downtown for the suburbs is returning, reversing a mostly one-way capital flow; investment in downtown now is measured in billions; a new sense of civic pride and can-do spirit has emerged, with business and political leaders now angling to push the reinvention deeper into the city's neighborhoods.

"The spirit and pride and excitement in the city goes beyond the seven-point-two," said George Jackson, retired CEO of the Detroit Economic Development Growth Corp. "When people visit the city they can feel it. I see a spirit with everybody — city residents and suburbanites. We've come a long way, and we should be proud."
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https://www.detroitnews.com/story/op...ved/782406002/

Quote:
Bankole: After bankruptcy, Detroit retirees feel deprived
Spoiler:
On July 18, 2013, Kevyn Orr, Detroit's former emergency manager, after failing to reach an agreement with union workers and creditors over how to address the city’s $18 billion debt, placed the city into chapter 9 bankruptcy protection.

That decision made Detroit the largest municipality in U.S. history to face that level of financial reckoning. And Wednesday will mark the five-year anniversary of that monumental and complicated act regarding the future of the city.

“The bankruptcy is the single largest devastating event the city has had to face since the 1967 riots because it affected so many people and it dramatically changed the worth of the city,” said Bill Davis, president of Detroit Active and Retired Employee Association.

Days leading up to the bankruptcy, Davis and a group of retirees got together wondering what they could do to save their hard-earned pensions.

They were hoping that no matter what happened their pension would be saved since it was protected under provisions in the Michigan constitution.

Davis, 60, who gave 34 years of service to the city working at the Waste Water Treatment Plant on W. Jefferson until he retired a year before the bankruptcy, was getting nervous.

Duggan-19.JPG
Former Emergency Manager Kevyn Orr and Detroit Mayor Mike Duggan (Photo: Detroit News file photo)

He had been sensing the direction the city was going after Gov. Rick Snyder tapped Orr, a Jones Day bankruptcy lawyer, to oversee the city's financial destiny at that point.

“Many city retirees and workers stayed in the city with their dollars to help our local economy,” Davis said. “I think the bankruptcy has made poverty worse for many of them who are living on the edge now and hoping that their kids and grandkids can keep them out of poverty.”

Davis said he knew there would be a lot of pain because retirees were on the verge of watching their life’s financial worth disappear for the most part.


“My own income dropped over a $1,000 a month. Even though I’m still young to receive Social Security benefits, there are many older retirees who have major medical bills. They are dealing with expensive prescriptions and have to come out of pocket for it now because they no longer have health care and cost-of-living adjustment,” Davis said.

At the time of the bankruptcy, his oldest son’s education at Michigan State University had to be put on hold because the tuition cost was depleting his savings.

“My son thought it was too much financial hardship on me because I was paying out of my pocket,” Davis said. “He dropped out and decided to go to Wayne County Community College. He then transferred to Wayne State University, where he will be graduating in December this year with his first degree.”

Evelyn Smith, who is in her 60s, was a longtime architect for the city who worked for the planning department before subsequently transferred to the Detroit Water and Sewerage Department. She retired three years before the bankruptcy.

“About $800 is taken out of my retirement check each month. I was getting health care from the city but after bankruptcy I had to pay out of my pocket,” said Smith, who said she is now on Medicaid. “Nothing has been done for pensioners.”

After 31 years of service to the city, Smith said she didn’t regret working even though the city ended in bankruptcy.

“I served the city and I served well. I was proud of that. My only regret is how the city handled my business after I left,” Smith said. “They had no compassion for the people who have put in work for 30 years. I regret what has been done to us as retirees.”

For Richard Mack, a prominent labor and employment attorney who represented 3,500 union members during the bankruptcy, it was tough to witness the proceedings.

“The city carried an undeniably large debt load. But the decision to bankruptcy was rushed and decided behind the scenes without input from the people who had the most to lose,” Mack said. “For the speculating investors who took less-than-wise gambles, bankruptcy caused a slump in their otherwise diversified portfolios. But for a number of the employees and retirees, bankruptcy forced them to decide on buying food or medicine, being unable to afford both.”

He added, “Their losses should have been much less, if they were necessary at all. Their losses equated to employees reading this article being told: you thought you were working for $25/hour, but you are only going to receive $20/hour.”
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