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Is Detroit REALLY “broke”? Because The Math Does Not Add Up

Louis-Philippe Duc d' Orleans Saluting His Army on the BattlefieldCan’t help wondering about this scenario.

The City of Detroit owns one of the finest art museums in the world.  On Wednesday, Christie’s auction house released its appraisal of… just 5% of Detroit’s artwork.  According to Christie’s, that small fraction of the collection is worth somewhere between $452 and $866 million.  Earlier, outside experts had given a ballpark estimate of $2.5 billion – for just 38 of the museum’s 66,000 pieces.

But Detroit can’t afford to pay its retirees’ pensions?

Far more troubling is the fact that the city apparently didn’t seek federal grant money before seeking bankruptcy.

Imagine yourself in the shoes of Kevyn Orr, the “Emergency Manager” that Governor Rick Snyder appointed back in March.  If YOU were walking into a place that was in fiscal trouble, wouldn’t you look around for revenues?  (Anybody else remember “Mediscam”?)

Yeah, well, that’s apparently NOT what Kevyn Orr did.

Back in September, federal officials identified more than $300 million in grant monies that Detroit was eligible for… but somehow… hadn’t gotten.

Democratic  Sen. Carl Levin: “There are dozens and dozens of programs available – some they haven’t applied for… some have been granted and are simply sitting there waiting for the city to do what they need to be doing.”

Yep, that’s what he said: “simply sitting there, waiting for the city” (which is now headed by Emergency Manager Kevyn Orr) to do what needs to be done.

Think about all the press stories you’ve seen, about Detroit’s financial situation.  Then look at the money that was “simply sitting there” waiting for federal officials to point it out:

  • Public safety concerns? Turns out there was $28 million in federal money available to hire police and firefighters, purchase equipment and pay for programs.  Plus about another $2 million available from private foundations.
  • Public transportation issues?  There was more than $130 million in federal money to repair buses, install security cameras and expand service to areas outside the city.  Plus another $3.3 million in private foundation monies.
  • Neighborhood blight?  More than $85 million in federal money to rehab (or demolish) housing units, clean up brownfields and otherwise fight blight.  Plus another $13 million from private foundations.
  • Bleak future?  Federal officials identified another $32 million in private grant monies to help Detroit plan for its future, upgrade its technology, train its residents and bring retail and creative industries back to the city.

Now, think again about Mediscam.  In New Hampshire, public officials faced with fiscal problems got (ahem) “creative” in order to maximize federal funds.

But in Detroit, Emergency Manager Kevyn Orr left more than $300 million in grant monies… sitting there.

Now, let’s look one more level down.

All the press reports about Detroit focus on that “$18 billion” of total debt.  That includes not just pensions and retiree health care liabilities, but also all the usual long term bonds that large municipalities have (about $3.7 trillion total, nationwide).

In a bankruptcy proceeding, the question shouldn’t be “How much does Detroit owe?”  The question SHOULD be “Can Detroit afford to pay its bills?”

And – with different political leadership – the answer to that question could easily be “yes”.

At the end of each fiscal year, public entities prepare a “Combined Annual Financial Report” that provides useful information about their finances.  Detroit hasn’t released its 2013 CAFR yet (even though the fiscal year ended more than five months ago).  But here’s what Detroit’s auditors said, in their 2012 Comprehensive Annual Financial Report:  “The City has an accumulated unassigned deficit in the General Fund of $326.6 million as of June 30, 2012, which has resulted from operating deficits over the last several years.”

So… as I do the math… those operating deficits have been accumulating over several years… but just ONE year’s worth of those grants (which have been “just sitting there”)… could almost completely offset that accumulated deficit.

Whoa… without even touching that art collection?  (And without restoring state revenue-sharing that was cut under Governor Rick Snyder?)

Maybe it’s just me… but I can’t help suspecting there is something else going on here, OTHER than fixing Detroit’s finances.

 

 

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About Liz Iacobucci

Liz Iacobucci is the former Public Information Officer for the State Employees’ Association of New Hampshire, SEIU Local 1984. Over the past three decades, she has served in government at the federal, state and municipal levels; and she has worked for both Democratic and Republican politicians.
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