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First Detroit, Now Flint Warns Bankruptcy "Train Is Headed For The Cliff"

Tyler Durden's picture




 

Flint may be Michigan’s second city to plunge into bankruptcy unless retirees accept cuts in health benefits that threaten to unravel a balanced budget. As Crain's Detroit reports, Emergency Manager Darnell Earley (Flint’s third emergency leader since it was placed under state control in 2011) warned "If we have no ability to mitigate the cost of retiree health care, that’s going to make it very difficult for the city to remain financially stable over the next few years." As Eric Scorsone notes, "Flint's at the forefront, but a lot of cities are on the same train, and that train is headed for the cliff."


As Crains Detroit reports,

As Detroit draws worldwide attention for its record $18 billion bankruptcy, Flint demonstrates the plight of U.S. cities where unfunded post-retirement costs rival or exceed pension liabilities. In Michigan alone in 2011, municipalities had nearly $13 billion in health-care liabilities for retirees, compared with about $3 billion for pensions. Flint is among 17 cities and school districts under some form of state control.

 

More than 80,000 Flint-area residents were employed by GM in 1978. Now, that number is about 7,500, according to a 2011 report by Michigan State University. In the past two years, the municipal workforce has been cut 20 percent and employees have taken a 20 percent pay cut.

Emergency Manager Earley warns...

Like Detroit, which a year ago this week filed the largest U.S. municipal bankruptcy, Flint has struggled with loss of population, jobs and revenue. The birthplace of General Motors Co. has only half its population of 1960.

 

“If we have no ability to mitigate the cost of retiree health care, that’s going to make it very difficult for the city to remain financially stable over the next few years,” Earley said in an interview at City Hall. Without changes, retiree pension and health expenses would consume 32 percent of the $55 million general fund.

 

“You can stabilize things by making sure that you’ve got the best systems in place for delivering services,” Earley said. “We haven’t had that in Flint for a number of years. We haven’t had that in Detroit for a number of years.”

The retirees are not happy...

The city’s accumulated deficit is $12.9 million, though its budget is balanced through June 30, 2016. Allowing higher insurance co-pays and deductibles for retirees will save $5 million this year, Earley said. That would make retirees’ coverage equal to that of active employees, he said.

 

Retirees already have made wage and pension concessions, and now will pay hundreds of dollars a month for prescriptions and co-pays, their attorney, Alec Gibbs, said in an email. He said retirees on fixed incomes will face life-threatening choices.

 

“Think of the position that they are putting these guys in: Pay for your health-care costs and starve, or use your fixed and paltry income to eke out a painful, shortened life,” Gibbs said.

 

Blaming retirees is unfair, said U.S. Rep. Dan Kildee, a Flint-area Democrat who founded the Center for Community Progress, a Washington, D.C.-based advocate for urban revitalization. More culpable, he said, are shrinking local revenue and the state’s cumulative $54.9 million reduction in aid to the city since 2003, according to the Michigan Municipal League.

 

“It’s a conspiracy of bad news,” Kildee said. “The state balanced its budget by unbalancing city budgets.”

This is systemic...

“If Flint were to go to bankruptcy, that would highlight that this legacy-cost problem has to be addressed more globally,” said Eric Scorsone, a Michigan State University economist. “Flint’s at the forefront, but a lot of cities are on the same train, and that train is headed for the cliff.”

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Sat, 07/19/2014 - 21:23 | 4978640 Winston Churchill
Winston Churchill's picture

Nuke it from space, just to be sure.

Sat, 07/19/2014 - 21:31 | 4978662 kaiserhoff
kaiserhoff's picture

Maybe use tactical nukes,

   just to be accurate;)

Sat, 07/19/2014 - 21:40 | 4978690 knukles
knukles's picture

Used to live real close to Flint.
Shithole then, and that was in the '60's
When it was prosperous.

Sat, 07/19/2014 - 21:51 | 4978741 economics9698
economics9698's picture

Demographics strikes again.  Let me guess, Pontiac next?

Sat, 07/19/2014 - 21:55 | 4978753 kaiserhoff
kaiserhoff's picture

Not just demographics,

  effnicity.

Sat, 07/19/2014 - 22:19 | 4978806 Anusocracy
Anusocracy's picture

Government keeps the people and the economy in its claws right to the very end.

Just like any self-respecting parasite.

Sat, 07/19/2014 - 22:35 | 4978839 mjcOH1
mjcOH1's picture

"Flint may be Michigan’s second city to plunge into bankruptcy unless retirees accept cuts in health benefits that threaten to unravel a balanced budget."

So, are we making odds on that? Or has the most naive person left on the face of the earth already died?

Sat, 07/19/2014 - 22:44 | 4978859 COSMOS
COSMOS's picture

Forget about health benefits, wasnt a town in Rhode Island or Alabama that slashed pensions by like 60% not too long ago.

Sun, 07/20/2014 - 02:30 | 4979088 kareninca
kareninca's picture

Rhode Island.  Central Falls.

Sun, 07/20/2014 - 07:11 | 4979230 GetZeeGold
GetZeeGold's picture

 

 

Thank goodness we've killed the 10th amendment.....I'm sure the feds will bail them out.....somehow.

 

Everyone gets a trophy.....and bad policies need to be rewarded.

Sun, 07/20/2014 - 07:15 | 4979234 Tarshatha
Tarshatha's picture

What Flint needs is hope. 

If only the people of flint had listeded to the Dear Leader's words of hope they wouldn't be in such a predicament today. 

Sun, 07/20/2014 - 08:55 | 4979331 McCormick No. 9
McCormick No. 9's picture

b--b-b-ut... wasn't Obamacare supposed to fix this?????

Sun, 07/20/2014 - 09:13 | 4979361 Keyser
Keyser's picture

Here's a plan... Turn the lights out in Michigan, turn the keys over to the Chinese and they wipe our debt clean... The Chinese clean up the mess made over the last 100 years and we wipe the slate clean..  Sounds like a plan to me!!!!!

 

Sun, 07/20/2014 - 13:22 | 4980161 espirit
espirit's picture

Those broke retirees' should at least save a few $$$ for a torch and pitchfork.

Sun, 07/20/2014 - 14:14 | 4980387 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

Somehow this article conveniently skipped over "public workers" getting big fat paychecks at the expense of taxpayers while everything around them declines. God help us all. Save the greed gov't worker!!!!

Sun, 07/20/2014 - 05:26 | 4979187 TheRideNeverEnds
TheRideNeverEnds's picture

Good, they should get rid of them alltogether.  Then we could maybe send more than just a paltry few billion per year to aid Israel, they are the chosen people after all.  

Sat, 07/19/2014 - 23:59 | 4978992 Antifaschistische
Antifaschistische's picture

I don't understand this dilemma....I thought the Affordable Health Obama Care act was going to fix all this.

Sun, 07/20/2014 - 12:08 | 4979939 Dingleberry
Dingleberry's picture

Not demographics....

DEMOCRATICS stike again.

Coming to a democrat metropolis next to you soon.

Sun, 07/20/2014 - 14:01 | 4980336 Monty Burns
Monty Burns's picture

Demographics strikes again.  Yes indeed.  But you'll hear evert possible alternative excuse offered instead.  If you ignore the cause of a problem you cannot solve it.

Sat, 07/19/2014 - 22:12 | 4978742 economics9698
economics9698's picture

Detroit, Flint, Benton Harbor, Pontiac, Gary, yea we know the drill.

 I grew up in Pontiac in the 70’s when they integrated the schools.  The segregated schools (before 1971)  had grammar sentence structure, math at grade level, and advanced time frames, maybe 5 or 10 minutes, to stimulate advanced students.  When intigration happened the grammar went away, we were allowed to read for a while, but that went away also. 

By year four (8th grade for me) the teacher had to read out loud books to the class in the hope some of our nonreaders would learn how to read.  It was dumb down city.  Everything became a joke.

Education had stopped. 

We played sports and pretended to go to school. 

The minorities became the majority and in the process brutalized the white kids.  Minorities were taught at a very early age to blame and hate white people.  It was ingrained in them like Muslims are ingrained to hate Jews.  Violence was a daily occurrence, drugs, rape, and when spanking was outlawed discipline completely disintegrated.  Anyone with money got their kids the hell out fast.   

It was a complete route of the middle class out of these communities.  It was very intentional government policy, just like the destruction of the family, so to was the destruction of these communities.  Intentional government social engineering. 

Sat, 07/19/2014 - 23:43 | 4978968 AssFire
AssFire's picture

“For the Age has itself become vulgar, and most people have no idea to what extent they are themselves tainted. The bad manners of all parliaments, the general tendency to connive at a rather shady business transaction if it promises to bring in money without work, jazz and Negro dances as the spiritual outlet in all circles of society, women painted like prostitutes, the efforts of writers to win popularity by ridiculing in their novels and plays the correctness of well-bred people, and the bad taste shown even by the nobility and old princely families in throwing off every kind of social restraint and time-honoured custom: all of these go to prove that it is now the vulgar mob that gives the tone.”

Oswald Spengler

1918

Sun, 07/20/2014 - 11:22 | 4979333 christiangustafson
christiangustafson's picture

Man is a beast of prey.

 

The animal of prey is the highest form of mobile life. It implies a maximum of freedom for self against others, of responsibility to self, of singleness of self, an extreme of necessity where that self can hold its own only by fighting and winning and destroying. It imparts a high dignity to Man, as a type, that he is a beast of prey.

-OS

Sun, 07/20/2014 - 09:08 | 4979350 oudinot
oudinot's picture

Maybe they wouldn't hate white people' if you had not taken them from their homeland and enslaved them.

Your ideas are crude, worthy only of an ignorant neo nazi.

Sun, 07/20/2014 - 09:10 | 4979353 oudinot
oudinot's picture

The governmant is happy that you 'hate' other people.  Divide and conquer only makes the government stronger. 

Sun, 07/20/2014 - 09:46 | 4979435 snodgrass
snodgrass's picture

Arabs and Jews ran the slave trade. Later Europeans and the English entered. It was the English who eventually ended it. Prior, Africans regularly conducted slave raids for themselves and to supply the trade. It's funny that no one ever blames Africans for supplying the slaves.

The best thing that ever happened to blacks was being brought to the west. Otherwise, they'd still be running around with bones in their noses. Average IQ of Africans is 70 which in the west is borderline retarded.

Sun, 07/20/2014 - 10:29 | 4979563 oudinot
oudinot's picture

Most of the African slaves were delivered by African Muslims.

Sun, 07/20/2014 - 12:48 | 4980069 disabledvet
disabledvet's picture

Don't think the Jews were ever slave traders. Certainly West Africans were...and Arabs.

Rhode Islanders were big time. So obviously were Virginians. Jefferson cut off the Slave trade externally...but that didn't stop slavery from expanding internally. The estates in Mississippi just prior to the Civil War were truly impressive.

Sun, 07/20/2014 - 15:52 | 4980758 paddyirishman
paddyirishman's picture

the jews were the biggest slave traders actually

Sun, 07/20/2014 - 10:49 | 4979630 markpower49
markpower49's picture

Apologists for blacks are pure evil.

Sun, 07/20/2014 - 14:21 | 4980417 Monty Burns
Monty Burns's picture

Well Whites in America would be just thrilled at the thought of y'all heading back to your African homeland. In fact they'd contribute generously to the relocation costs, I have no doubt.

Sun, 07/20/2014 - 15:33 | 4980665 Government need...
Government needs you to pay taxes's picture

Find an example of a first-world nation WITH A STABLE GOVERNMENT whose majority ethnic group is black whose government is also led by blacks.  While you are at it, explain why blacks test 1 standard deviation below whites on IQ and 1.5 standard deviations below asians.  Explain why black commit such a disproportionate amount of violent crime relative to their population contribution - in both the US and London, UK.  Finally, looking at country-by-country violent crime/100,000 citizens, why do countries with the highest proportion of blacks also have the highest rates of violent crime?

Mon, 07/21/2014 - 23:19 | 4986551 knukles
knukles's picture

Dude.   Nobody took the blackies lands away from them in Ponytiac, gary, etc.
They got shit on the cheap, FFS

Sun, 07/20/2014 - 10:21 | 4979536 _disengage_
_disengage_'s picture

In agreement about the social engineering/destruction, but the point I'd like to add is: Education has been dead longer than since the 70s. The trivium (and quadrium) have not been taught since the community schoolhouse (if even then).

John Taylor Gatto's books will actually support the rest of your thesis about social engineering the destruction of family.

https://en.wikipedia.org/wiki/Trivium

http://www.triviumeducation.com/interviews/start-here-gene-odening-inter...

http://www.johntaylorgatto.com/

Tue, 07/22/2014 - 14:36 | 4989222 papaclop
papaclop's picture

The exact same thing happened in Berkeley with integration. I got a decent education but my younger siblings were back in third grade. It was just like you said, with the white kids being brutalized but nobody complained because that would be "racist ".

Sat, 07/19/2014 - 22:11 | 4978786 SafelyGraze
SafelyGraze's picture

"In Michigan alone in 2011, municipalities had nearly $13 billion in health-care liabilities for retirees, compared with about $3 billion for pensions"

and that is precisely why there are Municipal Bonds, duh.

$13B - $3B = $10B, so that's how you right-size your bond, Michigan cities.

sheesh. 

plus, GS will help you structure your bond vehicles for maximum advantage.

hugs,
the city of birmingham

 

Sun, 07/20/2014 - 06:56 | 4979221 1neworbit
1neworbit's picture

If Detriot would pay off it liabilities they would have 30 million in cash, plus a whole. Lot of assets paid for. Checkout Walter Burien, & CAFR1.com???

Sat, 07/19/2014 - 21:43 | 4978703 NoDebt
NoDebt's picture

"Think of the position that they are putting these guys in: Pay for your health-care costs and starve, or use your fixed and paltry income to eke out a painful, shortened life,"

Oh, fuck you.  Welcome to the reality that MOST Americans face every day.  Go get a goddammed Obamacare policy then, since they're so fucking fantastic.  I'd be damned glad if just the pension was money-good in the long term.  

You were LIED TO, OK?  Don't give me that "we were promised" bullshit.  You knew who was making the promise, you should have known better.  Nobody else out here was promised shit and doesn't expect shit, so get the hell in line.

Sat, 07/19/2014 - 22:09 | 4978738 Da Yooper
Da Yooper's picture

You were LIED TO, OK?  Don't give me that "we were promised" bullshit.  You knew who was making the promise, you should have known better.  Nobody else out here was promised shit and doesn't expect shit, so get the hell in line.

 

YEP

& they all knew it

 

now they want to stick it to the taxpayers who havent got it

now watch the teachers hold their hands out for a 20 - 30 % raise like they are trying to do up here

you are over payed now ( for a government babysitting job ) get over it

you are not worth what you think you are worth

 

Just a little FYI to any

Teachers - Police & fireman & city workers

you

 

are not "SPECIAL"

 

you are just like the "REST OF US"

 

get over your selves

 

the system is going to fuck you like they are fucking us

 

so wake the fuck UP

Sat, 07/19/2014 - 22:21 | 4978815 logicalman
logicalman's picture

I knew the promises were shit, but I was still forced to pay for them.

Sat, 07/19/2014 - 22:26 | 4978828 Da Yooper
Da Yooper's picture

Join the club

 

you now know what it means to be

 

a

 

US TAXPAYER

 

remember an illegal alien's well being depends on YOUR

 

tax dollars

Sun, 07/20/2014 - 08:55 | 4979307 Thirtyseven
Thirtyseven's picture

Yes, they ALL knew it, but not one (not a fucking one!) stood up to suggest they not kill the Golden Goose. 

That Goose died a long, arduous, cancer-ridden death, but no worries, the fed.gov will simply fiat another Goose into place, just please don't mind if your breakfast is black pellets instead of white ovoids.

Sat, 07/19/2014 - 21:52 | 4978745 infinity8
infinity8's picture

+1K! And, we're all lied to about our "health-care" costs. Stop taking the pills and eating the poison, DO something for a few minutes a day and you'll feel better in 48 hrs, I promise. You can take 2 aspirin in the morning too, if you want.

Sun, 07/20/2014 - 12:37 | 4980037 jerry_theking_lawler
jerry_theking_lawler's picture

Don't let the secret out about aspirin....you can actually take more at once and get into second order reaction kinetics that helps most ailments. But for .10/day medical treatment, that just will not do in our 'system'....

Sun, 07/20/2014 - 10:32 | 4979572 grid-b-gone
grid-b-gone's picture

It's a blood, turnip thing, the result of 40 years of public contracts that did not support a long-term, multi-generational plan for success.

I've seen the same story play out on a small scale on sports teams and in scouting. One group puts in a fiscal plan to strengthen the organization and within a few years, new leadership wants to maximize the experience for their own kid and blows all reserves within a couple years. 

So, we are left to save and plan at the family level because most people of all walks of life want the biggest promise they can negotiate - the one that can't be kept.

At the family level, you move when your locale gets too greedy with taxes. Those with their lives staked to the pension promise stay. 10-20 years ago, the politicians and city finance people knew what the numbers were saying, but said and did nothing. You can get reelected telling people things they don't want to hear.

And so it plays out. Health insurance now, but I'll bet even the pension promises themselves can't be met.

16 cents on the dollar is the Detroit solution template, and this still needs to play out for many cities in the U.S.

Sun, 07/20/2014 - 11:27 | 4979756 adr
adr's picture

40% of the tax dollars in my old town go to pension and health benefits for retirees. Cops taking in $90k a year, teachers between $70-80k. Most of them under 60. Many will take a pension far longer than they actually worked.

Schools can't hire new teachers because pensioners are taking too much of the budget. Then the fuckers double dip and work as substitutes. I know a few retired teachers pulling in a $75k pension and then taking in an extra $30k working part time. Makes me fucking sick because my wife can't get a job because the fucking greedy sob's won't give it up. Then the non working pensioners complain that they aren't getting enough.

Fuck them all. Public sector retirement is impossible to fund, just like SS. Teachers in Ohio actually believe the teachers pension funds are fully funded for the next 30 years. The only thing worse than a blatant lie is people that actually believe it.

Sun, 07/20/2014 - 13:02 | 4980107 disabledvet
disabledvet's picture

All that money goes to the Bank and Wall Street.

The State itself does appear vulnerable to me as all of this is being paid for by the issuance of more debt which is not being bought because the Fed is buying up all the treasury issuance thus killing any hope for recovery.

The private sector has already responded by moving hundreds of billions to low to no tax jurisdictions leaving State and municipal authorities facing a crisis of epic proportions.

"Amazon Prime" alone is going to wipe out every State in the Union save NY.

Sat, 07/19/2014 - 21:45 | 4978718 Rentier88
Rentier88's picture

Living in a dump it's a put on...

Sat, 07/19/2014 - 21:31 | 4978664 Mr Pink
Mr Pink's picture

Maybe Michigan should sell the upper peninsula to Wisconsin. It should be ours anyway!

Sat, 07/19/2014 - 21:46 | 4978715 Da Yooper
Da Yooper's picture

NO

give us to Kanada

 

Chease heads suck

 

Ehhhhhhh

Sat, 07/19/2014 - 22:17 | 4978800 Mr Pink
Mr Pink's picture

Fuckin yooper....prolly a timber nigger. 

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