Tuesday, May 14, 2013

Detroit nears collapse, public employee unions remain in denial

The latest news on the financial situation of the city of Detroit is not good. But it's pretty much what everyone--or almost everyone--expected. Several months ago, Michigan Governor Rick Snyder appointed a bankruptcy lawyer--one Kevyn Orr--as the city's emergency manager. New laws in the State--enacted with cities like Detroit and Flint in mind--have given Orr an unusually large amount of power, something that roused protests from residents when the appointment was made. Nonetheless, Orr has been functioning at his post for over a month now. And today, he will deliver a full report on the city's financial situation to the State Treasurer, former speaker of the State House Andy Dillon (who, though appointed by Snyder, happens to be a Democrat).

In this report, according to the New York Times, Orr details the financial shortfalls of the budget, long-term unfunded liabilities brought about by unaffordable pension and healthcare plans, as well as physical plant failings, deep-seated mismanagement, and corruption:
Mr. Orr found that the Detroit Police Department, led by five chiefs over the last five years, suffers from “extremely low” efficiency, effectiveness and morale, and said its equipment and technology were out of date. The Fire Department has 52 facilities across the city, but as many as 12 may be essentially out of service on any given day, Mr. Orr said, because of “staffing and equipment constraints.” Meanwhile, he said, at least 60,000 parcels of land across the city are vacant, as are 78,000 buildings.

“The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” he wrote. “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.”
This is not how a major American city is supposed to be run. But this is Detroit and it has been this way for far too long, which has led to a large-scale abandoning of the area by people capable of getting out, leaving the tax base shrunken and inadequate. As Orr says:
The City of Detroit continues to incur expenditures in excess of revenues despite cost reductions and proceeds from long-term debt issuances. In other words, Detroit spends more than it takes in — it is clearly insolvent on a cash flow basis.
Yet, there remain some in denial, most notable union officials in Detroit who are rightly fearing that part of the solution there will be a major restructuring of the contracts for city workers, something that represents a huge percentage of the excess expenditures (not unlike many of the cities and municipalities in California that have also been entering or nearing bankruptcy of late). The Times piece even quotes a local union official of the American Federation of State, County and Municipal Employees in this regard:
“It’s not as bad as what they’re trying to make it out to be,” Edward L. McNeil, a local official for the American Federation of State, County and Municipal Employees, said on Sunday. Mr. McNeil had not viewed a copy of Mr. Orr’s report, which was not made public until late Sunday, but he said he had grown accustomed to overly negative assessments of Detroit by the state and its representatives.

“All of this was a cooked deal for them to take control of the city and take the assets,” Mr. McNeil said. “This has been a sham.”
As the new report makes clear, as various news reports on the finances of Detroit have made clear, these problems are not new. It's been apparent that Detroit was in deep waters--financially speaking--for many years now. The signs--the shrinking tax base, for instance--were available for all to see a decade ago, if not longer. Yet as recently as 2011 and 2012, stupidity abounded in Detroit, with regard to financial decisions and union rules.

In 2011, for instance, reports surfaced about monies being spent in Detroit--then teetering on the edge--on things like library renovations. In one particular case, a simple furniture update morphed into a huge multi-million dollar project:
The South Wing is stocked with 20 yellow and orange European lounge chairs that cost $1,092 apiece, artistic pendant light fixtures and two alcohol-burning fireplaces. The project morphed from a $300,000 furniture update to a $2.3 million overhaul with new floors, study rooms, lighting and built-in, wood-framed book shelves.
It sounds lovely. And indeed, I'm sure it looks lovely as well. But this is not the kind of project a city with declining revenues should be engaged in. Other excesses in just the Detroit library system are difficult to fathom, given the state of the city as a whole. For even as various library closing were considered, money continued to be spent on unnecessary things and on pay raises for staff:
It's not the only spending to come under question as the system considers closing up to 18 of 23 branches and laying off as many as 191 of 333 workers. A Detroit News review showed that, since 2008, the library has paid at least $160,000 to food vendors, including $1,760 at an ice-cream shop, and spent $1 million on 6 percent raises to union workers at a time counterparts in City Hall took 10 percent pay cuts.
By the end of 2011, four branches were indeed scheduled to be closed, though two of the four were subsequently reopened in 2012 with drastically shortened hours.

In 2012, an even more mindbogglingly stupid situation in Detroit came to light. It turned out that the city's water and sewer department still had a horseshoer on its payroll. It didn't have any horses, but it had a horseshoer, just in case I guess. Union officials predictably defended this situation, claiming that the position could not simply be eliminated and that the department was still understaffed. Yet in comparison to other cities and under the rubric of Detroit's shrinking population, that's a tough case to make:
The Detroit Water and Sewerage Department (DWSD) has a large debt, rising water prices and inefficient services — using almost twice the number of employees per gallon as other cities like Chicago.  
A recent independent report about the DWSD recommends that the city trim more than 80 percent of the department’s workforce. The consultant who wrote the report found 257 job descriptions, including a horseshoer. Capitol Confidential sent a Freedom of Information Act request to the department for the salary, benefits and job description of the horseshoer position.
For those interested, the position of horseshoer pays around $57,000 a year in salary and benefits.

The commonalities in these stories--and many others out of Detroit--are obvious: money being needlessly wasted and unions with limitless appetites feeding at the trough of the city. That's a very simple recipe for disaster. Yet, correcting these two issues represent the largest hurdles by far for anyone concerned with actually saving the city of Detroit (and many other American cities).

The problem is that far too many so-called public servants believe the system exists to serve them, not the other way around. And this mindset is fostered and protected by Democrats and the Left, by and large, there's no way around it (which explains why public employee unions like the American Federation of State, County and Municipal Employees donate money almost exclusively to Democrats). "Union busting" is a phrase--given its history--that stirs up emotions. But the fact of the matter is that entrenched unions are destroying cites like Detroit. And union officials know it. They really do.

Cheers, all.

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