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.”

[dynachrome]

“has only half its population of 1960.”

Same as Deeeeeeeeeetroit. Those that could get out, got out.

[blueunicorn6]

Sue the Democrat Party. They’ve got lots of money. The Democrats charge each other $32,000 a plate for meals.

[GOPJ]

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

Yeah, Michael Moore's getting a second mortgage on one of his mansions to help out...

Well, that's the story according to Michael Moore's butler - as told one of his chauffeurs... who shared it with the mansions' head chef... ( via the 'Moore Foundation' for tax free travel for Elites...by the actual Director of that organization AND a personal friend of Chelsea Clinton... who knows how to run that slush fund tax scam)

[GOPJ]

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

Yeah, Michael Moore's getting a second mortgage on one of his mansions to help out...

Well, that's the story according to Michael Moore's butler - as told by one of his chauffeurs... who shared it with the Mansions' head chef... ( via the 'Moore Foundation' for tax free travel of Elites...by the actual Director of that organization AND a personal friend of Chelsea Clinton... who knows how to run that type of slush fund tax scam)

[taildragger]

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.

CC love your post, you are wealth of information, please do tell of your source, and if it is a "public" source.

Also what is that 10,000 in terms of a percentage of the total Union Teachers in Michigan?

[Rides_A_Red_Horse]

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

---

You should move to Cuba. Everything is free!

[cripplecreek]

I get most of my info from Michigan Capitol Confidential and the Mackinac center. You'll have to dig up the stories yourself.

Michigan Capitol Confidential

Here is one interesting link with a little background on the August opt out.

MEA Rhetoric Aimed At Misdirecting Teachers From Focusing On August Opt Out

[St_Thomas_Aquinas]

Bankruptcy is the all-important last backstop. It’s a shame that the federal government can’t declare bankruptcy.

[St_Thomas_Aquinas]

Al Sharpton is right, the residents should get their water, and other city services, for free.

What does "free" mean to you?

Doesn't somebody pay for it? If not the residents, who?

[Chode]

this is what i told a guy i know(county union worker) awhile back, he was not pleased… I Don’t Care.

When you extorted your unjustifiable contracts, you didn’t care about the Taxpayers that will be forced to pay for your salary and benefits that is more, and better, than theirs, no…

You said: Either give me what I want, or I will hurt you.
I will GO ON STRIKE and I WILL HURT YOU!!!

NOT, If you don’t give me what I want, I will quit, and get a different job… NO!

It was, GIVE ME WHAT I WANT OR I WILL HURT YOU!!!

You were told over, and over, and over again, through the years, and extorted contracts, that it was unsustainable.

But YOU didn’t listen, and YOU didn’t care.

And the local government said OK, because there was nothing they could do, And, knowing it would be somebody else’s problem down the road, well...

Well, guess what?

It’s down the road, and now… it’s YOUR problem!!!
The trough is empty, and the teat is dry.

Can you hear ME now???

You were all fat dumb and happy as long as your snout was in the PublicTrough up past your eyeballs,

but now…

Now… that the food level has dropped below Your eyes, even YOU can see the writing on the wall as well as the rest of us.

There WILL be reduced benefits to be sure, if not outright eliminations…

And guess what???

I, DON’T, CARE!!!