This brings me no joy. I went to grad school in Detroit. I like this city. It has character, it has guts, it has potential.
It also has no cash to continue operations. And that sucks.
Detroit filed for chapter 9 bankruptcy a few hours ago.
There are many reasons for this, but there are a number of specific ones, that are generalizable to businesses as well.
First, population decline has led to a tax revenue decline. Detroit is no longer a large US city. Population is hovering just over 700k people, and dropping rapidly. Fewer people means smaller tax base. One may argue about the collection efficiency (low) and other issues, but the point is that to collect a fixed/growing tax revenue amount from a smaller group of people means you raise their tax rates. Detroit has not been in a position to absorb tax rate increases in several decades.
is due, in significant part, to bad law and bad policy enshrined in law. Ideological view points are hard coded in the firmware of Michigan. Which allows lawsuits and results such as this. It cannot be overemphasized how bone-headed this particular law is. That one can never, under any circumstances, reduce pensioner benefit values. This … Read morePart of the reason why Detroit has a long rough road ahead