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June 9, 2013

Detroit in Bankruptcy

As a result of Detroit's financial mess, the most innocent are the ones who may get hurt the most. The average citizen, including the retirees, who were taught to trust their political leaders and did not always understand what was being proposed deserve to be spared from as much pain as possible. Their guilt was being naive and innocently agreeing to what was proposed.

Kevyn Orr is making his offer in good faith which means there's very little wiggle room. The creditors will not accept an offer of $.1 on the dollar knowing they have a better chance in the courts.The creditors also know that the city has a significant amount of assets on its books that are recorded at below market value. 

The solution will happen outside of the courts and include a combination of the creditors accepting a reduction of the amount owed them by the city, restructuring some of the debt with the city by disposing of assets and reducing some of its services to its citizens.

The creditors will more likely go along with such a plan if they believe the city has in place a blueprint for the future to avoid slipping back into the abyss that it is in. The creditors will demand the city crystallize its vision of the future with a long term plan which eventually returns the city to growth and prosperity. No creditor will sign off on any debt restructuring without seeing a realistic road map for the future of Detroit.

The evolving of this plan should be a major topic in the current mayoral election and so far it has hardly been discussed. Further, I assume Kevyn Orr is demanding the present Council and Mayor  are laying the groundwork for such a plan. If they are not, these people should be terminated and their salaries saved.

The city has the assets which can make this work. The tough part will be deciding which assets should be sold. Personally, the assets occupying space at the DIA look very attractive. The average citizen of Detroit, the ones who are most innocent, will be least affected by such a sale. The wealthier citizens of Detroit and suburbanites who enjoy the arts will miss the opportunity of personally enjoying the magnificent artwork at the DIA, however in this emergency the pain must be shared.

The citizens of Detroit should not resist the sale of some of its assets. Instead, they should rejoice that the city has assets to sell. Without these assets the city would be forced to cut basic services further including police, fire, road repair, demolition of vacant buildings and perhaps the reduction of pay and benefits to city employees.

Kevyn Orr is doing his part, Detroit's creditors will look out for themselves, it is time Detroit's leaders and future leaders roll up their sleeves and go to work on a long term plan that can be believed by everyone; most importantly its average citizens.

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