Let’s cut to the chase here: Detroit City Council is on the road to approve a consent agreement that is like using a squirt gun on a general alarm fire.
The only way to solve Detroit’s financial problems is a Chapter 9 Municipal Bankruptcy. You may recall you read similar sentiments here before and after the work I’ve done watching the circus the consent agreement process has become I am now more convinced than ever the only way out of this mess is through the bankruptcy process.
There are many in the city of Detroit who will disagree with this notion; many who believe there are ways for the city to solve its own problems. They sell the soap there are ways to continue operating just the way the city has for generations; especially if the state of Michigan would simply pay the money, the $220 million “it owes” to the city of Detroit.
Michigan Treasurer Andy Dillon admits Detroit should have received that money. He says it is unfortunate that money did not come in but he is absolutely correct when he points out $220 million would be a drop in the bucket and would in no way solve Detroit’s immediate or long term financial problems.
It ignores one important fact that plays into whether the State would simply “pony up” the cash “Detroit deserves."
Every other municipality in the state of Michigan lost revenue sharing dollars over the past decade as well and if the state pays Detroit it must pay everyone. The state may have a small surplus but it is in no position to pay that kind of money. That would also require a Legislative vote to do so and there is no appetite in Lansing to do anything of the kind. For those who believe state dollars injected into the consent agreement would solve this problem; they too are wrong. The state does not and will not ever have enough money to solve Detroit’s financial problems.
You may doubt me, but allow me to draw your attention to the definition of insolvency.
Investopedia defines it as “a situation where the value of a company’s liabilities exceeds its assets.” The State Review Team estimates the state’s debt to asset ratio [assets divided by liabilities] as 33 to 1 in the NEGATIVE!