The prospect of cities declaring bankruptcy and defaulting on municipal bond obligations continues to worsen, with Detroit high on the watch list in financial circles.
One of the latest sentinels of the growing national problem is Jamie JP Morgan CEO Jamie Dimon. He expects to see more U.S. municipalities declare bankruptcy, Bloomberg News reports. His concerns echo those of others who have said the next major financial crisis will come from a wave of local government defaults, including famed investor Warren Buffett, who has called the municipal debt situation a "terrible problem."
"If you are an investor in municipals you should be very, very careful," Dimon said, according to Bloomberg. An increase in city defaults would ruin their credit rating make it difficult for other municipalities to continue borrowing money from bond investors.
Local governments have had to deal with painful erosion in tax revenue, which in some cases threatens to ruin budgets. Amid the severe financial downturn of the past three years, cities and states have had to severely cut back their spending, even as the need for their services has grown. While official bankruptcy remains rare, experts say there's trouble brewing.
To avoid such as worst-case scenario, Detroit planning officials have outlined steps that would eliminate key municipal services -- garbage removal, police patrols, road repair, street lights -- in some 20% of the city's 139 square miles. The plan is consistent with Mayor Dave Bing's plan to reconfigure Detroit to reflect it's declines in population and fiscal stability.
Neighboring Hamtramck, meanwhile, is one Michigan city that is quickly running out of services to cut. Michigan currently has 68 cities on its "fiscal watch" or "fiscal stress" lists, meaning these communities are at risk of running out of money -- some perhaps even early this year. Many communities, Hamtramck included, have seen sharp drops in their populations and tax base as laid-off manufacturing workers have moved elsewhere in search of new jobs.
Cities that do head for the red shouldn't count on Lansing for help. The Michigan state budget deficit for fiscal 2012 is forecast to be $1.85 billion, though some analysts suspect it will actually be more than $2.0 billion.
Welcome to office, Governor Snyder.
Thursday, January 13, 2011
Wednesday, January 5, 2011
Snyder cites goals to reinvent economy
Gov. Rick Snyder in his inaugural address called for a culture change in which cooperation, courage and innovation will lead the way to reinvented economy and enhanced quality of life in Michigan.
Snyder made his remarks on the Capitol steps upon taking the oath of office to become Michigan’s 48th governor.
“It is time to stop fighting among ourselves,” Snyder said. “It is time to solve our problems and create new opportunities.”
Snyder’s commitment to bipartisanship and public service was reflected in the inaugural ceremony, in which local and state leaders of both political parties were invited to participate. Detroit Mayor Dave Bing emceed the event and Grand Rapids Mayor George Heartwell delivered the invocation and closing prayer. The legislative majority and minority leaders shared the stage, which was not the case in previous inaugurations. Former Govs. Jennifer Granholm and John Engler also bridged the political gap by attending.
“We need to put party and geography aside and come together as Michiganders to reinvent Michigan,” Snyder said, but cautioned that getting Michigan back on track will require sacrifice and a new mindset:
“It won’t be simple or easy. There is no magic solution to our problems. But with most of our problems, there also comes opportunities. It will require shared sacrifice from all of us. Many have already made sacrifices. Many of us need to join those who have already contributed.”
Doing so will enable Michigan to achieve key goals such as becoming a globally competitive leader in innovation, creating more and better jobs and providing young people with greater opportunities and a bright future in the state.
Snyder pointed out the perils facing Michigan if its leaders continue to do business as usual.
“The old ways don’t work and it is time to start a new era,” he said. “This is our moment of opportunity to realize we have a bright future instead of a declining future.”
Michigan already has many building blocks for success in place, according to Snyder. Its world-class universities, unmatched natural resources and the entrepreneurial spirit of its people make Michigan unique. The inauguration showcased that theme by offering an abundance of food products grown or made in Michigan.
The governor said he looks forward to hitting the ground running with Lt. Gov. Brian Calley, legislative leaders and stakeholders across the state.
“I have been hired to represent all people of the state of Michigan and move us all forward together,” Snyder said. “We all want to live in a state of high expectations and results. We can only achieve extraordinary things if we aspire beyond traditional thinking. The old unbelievable needs to become the new achievable. Let today be the birth of a new chapter in Michigan’s history. Let today be the birth of the era of innovation and reinvention.”
Snyder made his remarks on the Capitol steps upon taking the oath of office to become Michigan’s 48th governor.
“It is time to stop fighting among ourselves,” Snyder said. “It is time to solve our problems and create new opportunities.”
Snyder’s commitment to bipartisanship and public service was reflected in the inaugural ceremony, in which local and state leaders of both political parties were invited to participate. Detroit Mayor Dave Bing emceed the event and Grand Rapids Mayor George Heartwell delivered the invocation and closing prayer. The legislative majority and minority leaders shared the stage, which was not the case in previous inaugurations. Former Govs. Jennifer Granholm and John Engler also bridged the political gap by attending.
“We need to put party and geography aside and come together as Michiganders to reinvent Michigan,” Snyder said, but cautioned that getting Michigan back on track will require sacrifice and a new mindset:“It won’t be simple or easy. There is no magic solution to our problems. But with most of our problems, there also comes opportunities. It will require shared sacrifice from all of us. Many have already made sacrifices. Many of us need to join those who have already contributed.”
Doing so will enable Michigan to achieve key goals such as becoming a globally competitive leader in innovation, creating more and better jobs and providing young people with greater opportunities and a bright future in the state.
Snyder pointed out the perils facing Michigan if its leaders continue to do business as usual.
“The old ways don’t work and it is time to start a new era,” he said. “This is our moment of opportunity to realize we have a bright future instead of a declining future.”
Michigan already has many building blocks for success in place, according to Snyder. Its world-class universities, unmatched natural resources and the entrepreneurial spirit of its people make Michigan unique. The inauguration showcased that theme by offering an abundance of food products grown or made in Michigan.
The governor said he looks forward to hitting the ground running with Lt. Gov. Brian Calley, legislative leaders and stakeholders across the state.
“I have been hired to represent all people of the state of Michigan and move us all forward together,” Snyder said. “We all want to live in a state of high expectations and results. We can only achieve extraordinary things if we aspire beyond traditional thinking. The old unbelievable needs to become the new achievable. Let today be the birth of a new chapter in Michigan’s history. Let today be the birth of the era of innovation and reinvention.”
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