Factbox: Detroit's outstanding liabilities

Factbox: Detroit's outstanding liabilities Fri, Jul 19 19:33 PM EDT (Reuters) - Detroit became the largest U.S. city to file for bankruptcy on Thursday, opening the way for a protracted court battle between the city and its creditors. Below is a break down of the major components of Detroit's $18.5 billion of liabilities: Special revenue bonds* $5.85 billion Pension-related certificates $1.43 billion Unlimited and limited tax general obligation bonds liabilities $1.13 billion Swap liabilities $343.6 million Other liabilities $300 million Unfunded OPEB liabilities** $5.7 billion Pension liabilities $3.5 billion * Includes $2.82 billion in sewage bonds and $2.52 billion in water supply bonds, among other issues ** Other Post Employment Benefits, including retiree health care costs Source: City of Detroit Proposal for Creditors, June 14, 2013 (Reporting by Edward Krudy; editing by Christopher Wilson) ========================= http://content.emails.thomsonreuters.biz/emessageIRS/servlet/IRSL?v=5&a=10111&r=18696&m=20706&l=1&e=2&x=2456584.0 Think big Bankruptcy isn't radical enough to save Detroit 19 July 2013 | By Agnes T. Crane Email Comment Save .Bankruptcy isn’t radical enough to save Detroit. Scrubbing Motown’s $18.5 bln of debt can only be a first step. The sprawling city suffers from blight, woeful infrastructure, a population exodus and falling revenue. The private sector has a role to play, but fixing so many broken windows needs longer-term government help. Detroit is three times the size of Boston, for example, yet the city’s revenue is less than half that of the East Coast city. Budget cuts have slashed operational spending by 40 percent over the past five years. But income from property, utility and income tax as well as from the state of Michigan has continued falling, too. That left City Hall with an accumulated deficit of more than $300 million at the end of the last fiscal year. Assume total annual revenue, though, settles at around $1 billion. With $692 million of expenditure, that looks fine on the surface. But securing a decent future for the city involves not just running it at the current emergency austerity level. It also requires cleaning up the waste, resizing the city and rebuilding the basics like functioning police and fire departments. Detroit’s reorganization plan, for example, allocates $500 million just to deal with the roughly 78,000 dilapidated buildings, most of which will need to be torn down. That will only pay for the small-scale demolition. It does not cover regenerating the industrial wasteland. That’s not cheap. Just ask General Electric, which could pay around $1 billion to rid the Hudson River of industrial poison. On top of that, the Motor City remains too large to service on the back of such a narrow tax base. The sewer and water system alone stretches over 1,079 square miles and the street lights, where they are functioning, often illuminate areas people have long fled. Detroit isn’t hopeless. Parts of midtown are thriving, thanks in part to a local university. Entrepreneurs have had some success in revitalizing the downtown area, too. But it can’t become a 21st-century city if it can’t cure its 20th-century affliction. Such large-scale, longer-term redevelopment requires government help – though only if well targeted and managed. If Washington can dole out $80 billion to the auto makers who helped build Detroit, surely it could help clear the debris to let new growth take root. ========================== Motown: A broken record in the rust belt Patrick L Young is expert in global financial markets working in multiple disciplines, ranging from trading independently to running exchanges. Get short URL Published time: July 22, 2013 07:40 A burnt out abandoned apartment building is seen in Detroit.(Reuters / Mark Blinch) Austerity, Budget, Economy, Employment, Modernization, USA The tale of Detroit’s decay is one of a long decline and a swift collapse when it finally became clear that 51 years of Democrat government has left the city utterly bankrupt. The marvellously gregarious American-domiciled British racing driver David Hobbs surmised street racing in Detroit beautifully in the early 1980’s. It wasn’t the narrow confines lined with concrete bollards which concerned him as he sped around a downtown street circuit consisting of roads normally open to metropolitan traffic. No, the real danger came from breaking down somewhere on the back stretch and then having to risk life and limb trying to get himself back to the paddock on foot through some highly dangerous areas! Thirty years ago that seemed to be a humorous aside which played to European phobias about the dangers of US cities awash with firearms. However, today Detroit is a post industrial horror story. A tragic morality tale of government corruption, union intransigence and the destruction of a city once famed the world over as 'motown' for its cars and eponymous record label... The city has shrunk from 2 million residents in its heyday to a mere 700,000 today, as private citizens fled the city while unions defiled the auto industry with dizzying demands for increases in wages and benefits which have left patriotic new car buyers paying a thousand dollars or more on the sticker price just to cover the gilded pensions demanded by the United Auto Workers. Chrysler Transport worker James Theisen carries a "Detroit Needs Jobs" sign as he joins a demonstration of about a dozen workers demanding jobs, in front of Cobo Center in Detroit.(Reuters / Rebecca Cook) Similarly Bloated municipal compensation led to dizzying budget increases which were challenging even when the economy was strong. As Detroit drove wealth creators away, the local economy decayed and last week it finally collapsed. Detroit has a litany of statistics which would sound ghastly in the poorest corners of the developing world. In the world’s greatest ever capitalist economy, they are unbelievable. 47% of Detroit residents are functionally illiterate, the murder rate is 11 times higher than New York and the police force solve barely 10% of crimes...although the later fact is perhaps quite impressive given that most police stations are closed for up to 16 hours a day. While it may have shocked the economically illiterate, the municipal debt bubble was clearly visible to any amateur who could do basic math. Detroit has been spending on an unsustainable scale just like Greece, for decades. A Detroit-style meltdown awaits anybody who believes an obese central government can spend their way to economic growth. Ironically last year, President Obama was trumpeting how he had ‘saved’ Detroit (aka the US auto industry) through his personal audacity. This bravery actually meant moving huge chunks of pensions liabilities onto the already burgeoning burden of American citizens. NB Non-unionised corporations like Mercedes and BMW can make cars in the USA and profit... The abandoned and decaying manufacturing plant of Packard Motor Car is seen in Detroit.(Reuters / Eric Thayer) The most worrying aspect of Detroit’s decline is the parable for the entire USA. America is increasingly nicknamed “Kickcanistan” in financial circles as the government repeatedly kicks the can of budgetary rectitude down the road. This abject irresponsibility makes the excesses of recent banker history look mild by comparison. In 1980 the US government debt surpassed a trillion dollars and now sits at almost 17 trillion. Moreover, just as the Democrats oversaw the decline and fall of Detroit, Barack Obama accumulated more debt in his first term than the previous 42 American Presidents combined! Detroit is America’s city of dysfunction: 210 of 317 public parks are closed, half the population over age 16 is unemployed and 60% of the street lights do not work. This municipal travesty is a hideous example of what happens when government spends without discipline. The result is citizen impoverishment even as government introduces ever more entitlements and raises benefits. Capitalism has given way to socialism and Detroit has collapsed in a morass of mismanagement. In 1962 Detroit was a trendsetter in motoring and music. Now it is a trendsetter in that dark truth which will always upset the tax and spend brigade: big government does not work. The wastelands of Detroit now resemble something more like a Mad Max movie than a modern digital city. At a macro level, the longer Washington ignores its responsibilities and refuses to wean itself off its massive debt addiction, the closer the USA comes to being the United States of debt, decay and disharmony... There is a clear lesson in the collapse of Detroit that all governments need to heed. Reuters / Eric Thayer The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Romanians protest against gold mine plan

28 Jan 2012 21:38 Source: Reuters // Reuters * Critics say gold mine will harm western Romanian town * Town residents rally in favor of the project * Anti-govt protests held for the past two weeks By Luiza Ilie BUCHAREST, Jan 28 (Reuters) - Hundreds of Romanians protested on Saturday against a plan to set up Europe's biggest open-cast gold mine in a small Carpathian town((A major mountain system of central Europe in Slovakia, southern Poland, western Ukraine, and northeast Romania. Extending in an arc about 2,253 km (1,400 mi) long, the range links the Alps with the Balkan Mountains and is a popular year-round resort area. )), joining a wave of anti-government rallies. For the past two weeks, thousands of citizens have gathered in cities across Romania to demand the resignation of President Traian Basescu and his close ally, Prime Minister Emil Boc, as anger over austerity measures and falling living conditions have spread. The protesters have also criticised Basescu and the centrist coalition government for backing the gold mine project in the western town of Rosia Montana. However, most town residents support it, and also held a rally on Saturday. The project, which aims to use cyanide to mine 314 tonnes of gold and 1,500 tonnes of silver, has drawn fierce opposition from civic rights groups and environmentalists, who say it would destroy ancient Roman gold mines and villages. It is led by Rosia Montana Gold Corporation, majority-owned by Canada's Gabriel Resources Ltd with the Romanian government holding 19 percent. Waving Romanian flags and banners saying "United for Rosia Montana", about 300 protesters gathered outside parliament in Bucharest. They called on the government to deny Gold Corporation an environmental permit it needs to open the mine. "Never mind that this project is an utter environmental catastrophe waiting to happen, but it is also the worst possible business from a financial point of view for the Romanian state," said Vlad Rogati, a 61-year-old retired engineer at the rally. "We are being misled. The promised jobs for miners are an illusion." Most of the 2,800 residents of Rosia Montana hope the project will bring jobs and money to their impoverished town, which took a hit when a state-owned gold mine closed in 2006. Only a small group of residents refuse to sell their property to make way for the mine. Television footage showed hundreds of people at the rally. "We are standing on gold but dying of hunger", said one banner. Gold Corporation has valued the mine at $7.5 billion, of which it said Romania would get about $4 billion in direct taxes, dividends, service providers and jobs. The Environment Ministry said on Saturday it was still evaluating Gold Corporation's permit request, and that it would propose that the government grant it "only if there is certainty the investor will respect the best mining practices so that it will not harm the environment", according to local news agency Mediafax. The company proposes four gold quarries over the mine's lifespan, which would destroy four mountaintops and wipe out three villages of the 16 that make up Rosia Montana, while preserving the historical centre. (Editing by Alessandra Rizzo) ======================= INTERVIEW-Romania opposition wants new IMF deal, early election 02 Feb 2012 15:43 Source: Reuters // Reuters * Opposition leftist USL favourite to win November vote * USL leader wants early election, easing of IMF conditions * Aims to cut VAT gradually to 20 percent by 2016 * Analyst says new IMF deal would ensure predictability (Adds analyst comment) By Sam Cage and Radu Marinas BUCHAREST, Feb 2 (Reuters) - Romania's government is unable to push through reforms and should resign now to give the austerity-hit country the chance to right itself under new leaders, opposition head Victor Ponta told Reuters on Thursday. In an interview, Ponta said his leftist USL alliance - favourite to win a November parliamentary election - would continue to work with the International Monetary Fund (IMF) but aims to ease austerity measures such as value added tax (VAT). Anti-government protests spread around the country last month and opinion polls show the USL with more than 50 percent of votes. Ponta said he was keen for elections to be brought forward even if that meant temporarily installing technocrats. "To have early elections like in Spain, or to have a technocratic government like in Italy, that would be a solution to cool down a little bit the social unrest and to give fresh air and fresh energy," he said. Some analysts say the USL may not stick to the fiscal discipline of centrist Prime Minister Emil Boc, who cut public sector pay and raised VAT to maintain a 20 billion euro ($26.4 billion) IMF-led bailout. "Every day that a government which has lost the support of the people and even the support of the parliament stays in power, it's a day lost for reforms and the stability which we need," said Ponta, a 39-year-old lawyer from Bucharest. "The austerity measures were something necessary not only in Romania but across Europe," he said at the USL's offices by Bucharest's version of Paris's Arc de Triomphe. "But our economy is perhaps still the weakest in the EU." Romania is the European Union's second poorest member with an average wage of less than 350 euros a month and, while the economy grew about 2.5 percent last year, austerity and the euro zone debt crisis will keep a lid on a slow recovery. Income per capita is less than half the EU average and Boc and his ally, President Traian Basescu, have been rocked by three weeks of occasionally violent protests demanding their resignation over austerity cuts and perceived corruption. Ponta marks a change of guard for his PSD party, founded chiefly by former communists and now the dominant force in the USL, though some analysts and opponents say he remains under the influence of its founder, Moscow-educated Ion Iliescu. A keen sportsman and former national rally champion who speaks five languages, Ponta is young enough to have no links to former dictator Nicolae Ceausescu. He spoke confidently of the USL's plans and said he would work with the IMF. "It's an agreement signed by the Romanian government and whether it's that government or a new one, we should keep it," he said. The USL would sign a new deal when the existing one expires in 2013, but does not plan to draw on the available funds, he said. "It is premature to talk about post-electoral plans or alliances, though a fresh deal with the IMF would be beneficial for ensuring much needed predictability," said Ionut Dumitru, chief economist at Raiffeisen Bank in Bucharest. Ponta said he would not immediately cut value added tax to 19 percent from 24 percent - as pledged - but would aim to cut it gradually to 20 percent by 2016. The USL would also stick with the flat 16 percent tax rate on income and profit if possible, a change from a previous commitment to a progressive tax policy which some businessmen say deters investment. "Predictability of taxation is very important," Raiffeisen's Dumitru said. "If it is implemented it would create premises for a healthy economic policy." ($1 = 0.7577 euros) (Editing by Louise Ireland and Alessandra Rizzo) ====================