Bankruptcy may be only answer for Detroit

Ann Arbor — Same song … second verse. That’s my reaction to last week’s news that the state team charged with reviewing Detroit’s financial condition has unanimously concluded that a financial emergency exists in the city. To quote them exactly: “… a financial emergency exists because no satisfactory plan exists within the City of Detroit to resolve a severe financial problem.” That’s putting it mildly. The city’s cash shortfall is likely to hit $100 million by June. The deficit accumulated since 2005 mounts up to nearly a billion dollars. Detroit’s unfunded long-term debt (mostly pension and other retirement benefits) is about $14 billion. That comes to around $20,000 per city resident. When General Motors went into bankruptcy in 2009, it had a staggering debt-to-asset ratio of 20 to 1. That meant for every dollar of assets GM had, the automaker owed $20 in debt. Detroit’s debt-to-asset radio? It’s now 33 to 1.

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