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

Zero Hedge ^ | July 19, 2016

[Zakeet]

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.”

[Zakeet]

According to Wikipedia:

In 1908, Flint became the birthplace of General Motors, and was later the home of the Flint Sit-Down Strike of 1936–37 that played a vital role in the formation of the United Auto Workers, and eventually became an automobile manufacturing powerhouse. However, by the late 1980s the city sank into a deep economic depression after GM closed and demolished several factories in the area, the effects of which remain today. In the mid-2000s, it became known for its high crime rates. Since this time, Flint has been continually ranked among the "Most Dangerous Cities in the United States", with a per capita violent crime rate seven times higher than the national average. It has also been in a state of financial emergency since 2011, the second in a decade.

Most politicians are affiliated with the Democratic party despite the city's elections being nonpartisan. In 2006, Flint was the 10th most liberal city in the United States, according to a nationwide study by the non-partisan Bay Area Center for Voting Research which examined the voting patterns of 237 cities with a population over 100,000. Flint placed just after San Francisco (9) and before Seattle (16) and New York City (21).

[lowbridge]

Not to worry. Michael Moore will come to their rescue.

[Balding_Eagle]

Even if these MI cites go into bankruptcy, Al Sharpton is right, the residents should get their water, and other city services, for free.

[blueyon]

On a different subject yet the same, remember when in 2008 they were saying teachers will be laid off, states will go down as they did not have enough funds....that’s how we were sold the “Stimulus”. Since nothing has been done to correct the root cause of the problem (spending more then taking in) we are headed for a repeat of 2008...

[Gen.Blather]

The high standard of pay enjoyed in America after WW2 was a direct result of the devastation the rest of the world suffered. They bought our products at any price. But now we are competing with the entire world, most of which has newer and more efficient factories and much lower wages.

Another destroyer was the Fed eternally printing money which made the pay saved by those workers disappear at an accelerating rate. The workers were over-promised by politicians who would not have to pay the bill or even be alive when it hit.

Then the government imposed regulations, the EPA, law-fare and other problems on manufacturers who stayed here driving them out of business. And the government is the cause behind the high and ever higher costs of medical care with regulations and laws that create reverse incentives and discourage doctors from entering the profession.

This is an entirely politically caused problem. Socialism has come home to roost.

[cripplecreek]

Even if these MI cites go into bankruptcy, Al Sharpton is right, the residents should get their water, and other city services, for free.

So who is going to pay to pump it and treat the water and pay for things like trash disposal?

[bandleader]

According to The DemonRats,EVERYTHING Should Be FREE!!It’s in The Constitution!!!!!!!!!!!!!!!!!!

[PGalt]

“This is an entirely politically caused problem. Socialism has come home to roost.”

Nailed it. Thanks.

Socialism Is Legal Plunder - Bastiat

http://www.usdebtclock.org

http://www.usdebtclock.org/state-debt-clocks/state-of-michigan-debt-clock.html

Map of bankruptcies (last updated Dec 2013)

http://www.governing.com/gov-data/municipal-cities-counties-bankruptcies-and-defaults.html

Not to worry. The BIGGER GOVERNMENT FED socialists will fix this. /sarc

[JamesA]

Flint used to be a good place to live but crime jumped due to the give me crowd, “You owes me types.” Forget about selling your house, no one wants to move there. Just move with your life and what possessions you can carry. Very sad.

[cripplecreek]

It cracks me up when liberals say I can’t talk about paying for water because mine is free. My water is “free” for as long as I continue to pay my electric bill, buy and maintain a pump and related plumbing.

[snoringbear]

“So who is going to pay to pump it and treat the water and pay for things like trash disposal? “

Uhh, you and me....

[Nevadan]

Re: So who is going to pay to pump it and treat the water and pay for things like trash disposal?

I would guess that this is where you and I, the US taxpayers come in, via a federal bailout. Of course, that will only last for a brief time. Then they will need another. If Hillary gets in for the next 8 years, they are good to go for their extensions after Obama’s reign ends.

[Balding_Eagle]

Silly question. Unicorns.

[cripplecreek]

There are liberals who want meters on our private wells in Michigan. They claim its only for monitoring purposes and not about charging for the water but somebody will have to pay for the monitors. From there I suspect it would be less that 5 years before someone decided that paying just a few dollars per month for our own well water couldn’t hurt.

[taildragger]

Zero-Hedge needs a reporter on the ground in Michigan.

It is way more than Flint that is looking a "Chapter" in the eye.

So is Wayne County, Hamtramck, and their are others ( Pontiac? )

CrippleCreek, would you like to update this potential list?

[jjotto]

Zero Hedge is a Romanian blogger. Any truth to stories from there comes from other, better sources.

[4yearlurker]

...and don’t forget your property taxes.

[cripplecreek]

Cities all across the country are on the verge of collapse and the only reason they’re making news in Michigan is because Rick Snyder lifted the veil.

It ain’t pretty but it needed to be done and I think it puts us ahead of the game for when the collapse goes nationwide. I just wish other states would pay heed rather than kicking the can down the road.

[Steven Tyler]

The Progressives need the union support, so they always kick the can down the road.
Well, they ran out of raod, in some locales, and the can fell over the cliff.

The Teacher unions are advised to sit up and take notes

[cripplecreek]

After next month teachers unions in Michigan are going to be a shadow of their former selves. August is opt out month and some 10,000 Michigan teachers have already quit paying dues.