Where does the money come from to finance the restructuring of Detroit should the city enter bankruptcy?
That is one of the questions raised by Detroit News Columnist Daniel Howes Thursday as he contemplates what Detroit in Chapter 9 means for a number of important people including public officials and all Michigan taxpayers.
"Among the myriad problems complicating the looming financial collapse of Detroit, few are more politically fraught for Gov. Rick Snyder, state Treasurer Andy Dillon and the Republican-controlled Legislature than identifying the source of funding likely to be needed to finance a lengthy restructuring — including a Chapter 9 bankruptcy — of the cash-strapped city.
"Detroit consistently overestimates tax revenue and underestimates its spending. Its revenue sources are "tapped out," as one ranking source familiar with the situation described it; a hit looms of more than $400 million in swaps owed to counter-parties; and many reforms promised nearly a year ago under the consent agreement remain undone.
Howes writes there is no one coming to Detroit's rescue, unlike what happened in the bankruptcy for the auto companies.
"There is no president of the United States, barely a few months into his first term, armed with a massive pot of taxpayer dollars and the threat of economic collapse in the Midwest preparing to intervene. There is no consortium of lenders fronting debtor-in-possession financing for Detroit, in part because it's not clear who's in charge and whether the debtor would be Mayor Dave Bing, a quorum of City Council or the city's corporation counsel."
More coverage about a possible Detroit bankruptcy in Thursday's Detroit News: It's not an attractive option, by Leonard Fleming.
