“Swap termination” would amount to one-third of city’s 2012 budget
Massive lay-offs, severe wage cuts, gutting of city services, drastic increases in water rates, taxes, and sale of assets likely under EM
By Diane Bukowski
December 19, 2011
DETROIT – According to reports from Moody’s and Fitch bond ratings services, banks plan to rob Detroit of $400 million, one-third of its 2012 budget, if an emergency manager is installed by Michigan Governor Rick Snyder.
(Center) Stephen Murphy of Standard and Poor's and Joe O'Keefe of Fitch Ratings are flanked by then Detroit CFO Sean Werdlow (l) and Deputy Mayor Anthony Adams in 2005 as they bludgeon City Council into borrowing $1.5 billion in pension obligation certificates, a debt that is repeatedly coming back to haunt Detroit.
“The state appointment of an emergency manager would in turn trigger a termination event [default] under the city’s swap agreements,” Moody’s said Dec. 13. The “swap agreements” relate to $1.5 billion in pension obligation certificates the city borrowed in 2005 during the Kwame Kilpatrick administration, from Zurich-based UBS AG and New York’s Siebert Brandford Shank & Co. (SBS).
The city defaulted once before on that debt, in 2009. Then Mayor Ken Cockrel’s administration forestalled a likely bankruptcy by agreeing to have Detroit’s casino taxes go directly to a bank trustee to ensure payment of the debt. A trustee was already overseeing its revenue-sharing taxes.
MGM Grand, one of Detroit's three casinos; a bank trustee rakes in all of Detroit's casino tax revenues to ensure debt pay-off.
Detroit’s Channel 7 interviewed Pat O’Keefe, of O’Keefe and Associates (see video above.)
“Since they [Detroit] have been struggling for so long,” O’Keefe said, “they have a number of bond agreements that cause acceleration in some of the debts if an emergency financial manager is appointed. As a consequence it is almost a self-fulfilling prophecy that will cause the city of Detroit to continue to hemorrhage even more cash because of the accelerated payments on some of these bonds.”
Wall Street is not waiting for an emergency manager, however, to shake Detroit down.
On Dec. 15, it raked in $211.6 million on a water bond sale of $484 million, according to the Wall Street Journal (click on Detroit Sells Muni Bonds at a Price WSJ, 12/15/11 and on http://dwsdupdate.blogspot.com/2011/12/emergency-financial-manager-appointment.html for more complete information).
U.S. District Court Judge Sean Cox
The ratings agencies said Detroit Water and Sewerage Department (DWSD) bonds, which previously had up to AAA ratings, are under scrutiny because DWSD belongs to the city. They said buyers were more willing to invest in the bonds after U.S. District Court Judge Sean Cox’s November 11 decision severing much of Detroit’s control over the DWSD, but only at a hefty price.
What does this mean for the people of Detroit, the largest majority-Black city in the world outside of Africa, and the country’s poorest city? What are the implications for its its surrounding suburbs?
First of all, the water bond sale portends a hefty increase in water rates for one-third of Michigan’s population, which is served by DWSD, and more shut-offs for those who cannot afford them, this spring. Further lay-offs and service cutbacks will also result.
James Fausone, Board of Water Commissioners chair
Since the Board of Water Commissioners, newly reconstituted under a consent agreement with Cox in February, must have a supermajority of its seven votes to approve rates and contracts, its three suburban representatives have veto power over both.
The chair of the BOWC is James Fausone, who is already connected with a waste-to-energy conversion contractor like Synagro. It is likely that other Commissioners will hand out more costly private contracts to their friends, further depleting DWSD funds and putting the burden on its customers. (Click on http://voiceofdetroit.net/2011/11/10/cox-axes-detroiters-control-over-water-department/ for further information.)
Cutting one-third of Detroit’s budget of more than $1.2 billion is virtually unimaginable.
According to the Crain’s article cited earlier, the city administration had great difficulty getting its creditors to agree to take control of its casino tax revenues instead of calling in $4oo million then.
French demonstrators march against pension cutbacks earlier this year; Fitch just downgraded France's bond ratings as well.
Where will they turn now to avoid economic disaster? The city’s pension funds, worth $6 billion, are likely the first target, low-hanging fruit for UBS and SBS. Mayor Bing earlier targeted them for a takeover by the Municipal Employees Retirement System, based in Lansing.
Faced with similar economic distress, other municipalities and companies have eliminated health benefits for retirees, and in the case of bankruptcy, even halved their pensions, a solution the city of Vallejo, California resorted to. (Click on http://www.huffingtonpost.com/2011/01/31/vallejo-bankruptcy_n_816060.html for complete information.)
If an emergency manager takes over, he would also have the power to sell DWSD, the third largest water and sewerage system in the county, lock, stock and barrel. (Click on dwsd_fact_sheet[1] for complete description of DWSD assets.)
Water pump station in Pontiac, Michigan
Pontiac’s emergency manager Louis Schimmel just put on the auction block 11 water-pump stations, five fire stations, the public library, the police station, two community centers, two landfills, and two cemeteries.
Schimmel told Kathleen Gray of the Detroit Free Press that because he is required to hold a public hearing anytime the city has assets to sell, he might as well put everything on the list. No one showed up for the public hearing he held Dec. 20.
“We just want the option,” the Free Press quoted Schimmel. “We don’t want to come back piece by piece.”
Fitch Ratings put the city between a rock and a hard place, squarely on the back of its workers and residents, many of whom already live below the poverty level.
Fitch red flagged the movement to repeal Public Act 4, which has gained steam since Snyder began a state financial review Dec. 6, the first step in the appointment of an EM. As noted in the article above, a Jan. 2 town hall meeting in Detroit has been called by City Councilwoman JoAnn Watson and U.S. Representatives John Conyers and Hansen Clarke, which will focus on ramping up the signature-gathering.
“If Act 4 is suspended, avenues for addressing the city’s financial difficulties in the near term will narrow,” Fitch said, indicating that it will not let up on its ratings war against Detroit no matter which route is taken.
The need for a massive fightback by working and poor people against the reign of the nation’s banks over basic needs like water, food, housing, utilities and jobs is now more than ever glaringly apparent.
March during Oakland, CA general strike November 17
Hi! DIANE! YOU ALWAYS HIT EVERYTHING RIGHT ON THE MONEY!! TOO BAD WE DON’T HAVE PEOPLE LIKE “Miss COFFIN” AND A STRONG MAYOR LIKE THEY HAD BACK IN 1893 UNDER “MAYOR PINGREE” AS MAYOR??
CHECK THIS PART OF HISTORY OUT???
Diamond-II Productions
Keith M. Hines
832 CHALMERS Det., Mich. 48215
Bus. 1-313-331-1202 Cell 1-313-655-7165
DIAMONDII_PROD@HOTMAIL.COM
***WHERE IS “MATHILDE COFFIN”***(DPS)
Too Bright For “The Detroit Public Schools” Notes By: “Keith Hines” From An Article Written By Writer: “Wilma Wood Henderson” Published In The Book: “Detroit Perspectives” (Crossroads and Turning Points) Printed By “Wayne State University Press”.
To “Whom” It Might Concern, Or Might Have Given Wonderment, While Most Have Questions About Why We Are Not Educated ?????
Hi! Me KEITH Here: I Sit Here Tired With A Headache, Aching Back, and Tired Fingers But The Questions ??? Of “DETROIT” And “Miss Coffin” Must Be Asked ??
So There is Always A Story To Be Told About The Why’s , What’s and Lack Of Our Education Structure Here in Detroit. Let “Us” Go On A Trip Back In History To **1896** Here In Detroit And Ask Anyone “Where Is *Mathilde Coffin*” A Woman Who Has Been Left Out Of “Our Detroit History Books”, One Is Only Left To Wonder ???? *Once ! (“The Assistant Superintendent Of Our “Detroit Public School System” and “Vice President” Of The “Women’s Educational Union” **1896 to 1897**) Was It True That She Was “Too Bright For The Schools”. ??? All She Wanted To Teach Was “The How-and-Why-History Should Be Taught” ???
The Then Called “The Detroit Evening News” Later To Be Known As “The Detroit News” Waged An Ongoing Attack On Her Because Of Her Efforts And Strong Desires To Teach Students More Than Just “The 3-Rs”.
“The News” Wrote: God Help The Poor Children…This New “FAD” Is Not Proposed For The Purpose Of Making Them Better Readers, But Solely To Stuff Their Poor Brains With The Press Of Rubbish That Is Called “The News Of The Day”….Wise Fathers And Mothers, While Their Children Are Still At School, Try To Keep The Newspapers Out Of Their Hands…It Is Astonishing That Anyone In Authority In The Schools Would Have The Impertinent Audacity To Propose Forcing Into The Child’s Hands Reading Matter Which His Father or Mother Would Shrink From Giving Him Access To At Home.
(“You” And “Me” Know Of These Same Teachings Today As “Current Events”)
Ms Coffin Responded With “Your Free Use Of The Word “FAD” Prompts Me To Ask What You Mean By It…Are The Drawing, Physical Culture, and Nature Study “FADS” ??…You Plead For The Three R’s. Nature Study Furnishes Something To Read and Write About. We Do Not Find That The Presence Of Something To Say “Dissipates The Minds Of The Children” In Writing. If Our Children Are Allowed To Continue This Study Of Nature and History, They Are In Danger Of Forming The Habit Of Saying “Something” When They Write ??? Then One Editor For The Newspaper Openly Stated That Employers Would Prefer *NOT TO HIRE* “Young, Bookkeepers” Whose Training In Mathematics Might Cause Them To Raise Awkward Questions. Coffin Retorted, “A Boy Is More Than An Adding Machine”.
“I” Wonder Just Who Was This Woman That Did So Much To Try To Educate The Young Children Of Detroit ??? And Why Is She So Eliminated From Our Pasts ??
COULD IT HAVE BEEN THE “CORPORATE COLONIALISM” OF IT’S DAY WITH THE INTENT SOLEY TO HARVEST A CLASS OF WORKERS WHO WOULD ANSWER ONLY TO THEM AND BEG FOR FAIR TREATMENT IF THEY WISH TO LIVE AND EARN WAGES ??? SOUNDS TO ME LIKE “Gov. SNEAKY (Slick) SNYDER” and “DON the FOX FICANO” AT WORK $$$???
Take Care! ***Me KEITH / D-II*** ***Love*Peace*Out***
HELLO DETROIT !! ***Me KEITH / D-II***
So HERE WE GO AGAIN REPEATING HISTORY BUT HOPEFULLY WE ARE LEARNING FROM OUR PAST “NOT TO LET IT EVER HAPPEN LIKE THAT AGAIN” !!
THIS WAS A VERY IMPORTANT WOMAN IN DETROIT’S HISTORY! ALL SHE WANTED TO DO WAS TEACH MORE THAN THE 3-Rs AND SHE WAS ALMOST WIPED FROM OUR HISTORY.
THIS EXPLAINS WHY THEY WANT TO CLOSE OUR SCHOOLS AND LIBRARY’S ???
JUST INVESTIGATE, CHECK THIS OUT AND, WHAT DO YOU THINK???
Take Care!! ***Me KEITH / D-II*** ***Love*Peace*Out*** !
Now For A Little Something More From Our Past; A Letter Written By “Mayor Pingree” To “The Board Of Education” Dated; January 26, 1893
To The Board Of Education:
GENTLEMEN:-I Am Informed That It Has Been The Custom Of Your “Committee on Real Estate and School Buildings” To Open Bids For The Construction Of School Buildings, Heating, Ventilation, etc…, In The Secretary’s Office, Behind Closed Doors, To Which The Representatives Of The Various Newspapers And The Bidders Themselves Are Denied Admission. This Plan May Be Pursued From The Purest Of Motives And The Opening Conducted With The Most Absolute Impartiality And Fairdealing. But The Fact That This Important Work Is Done In Secret, When It Should Be Open To The Public Scrutiny As The Sunlight Of Heaven, Engenders Suspicion Of Wrong-Doing, Where Perhaps None Actually Exists. Your Board Is Handling The Public Money, And A Large Amount Of It; And Not Only Your Actions, But Also Those Of All Your Committees, Should At All Times Be Open To Public Inspection. As Mayor Of The City, And As An Ex Officio Member Of Your Board, I Would Respectfully Advise The Adaption Of A Resolution Directing That Hereafter The Opening Of Bids For Any Kind Of Public Work In Charge Of “The Board of Education” Be Open And Public, Instead Of Private And Secret, As At Present.
Very Respectfully,
H. S. PINGREE *Mayor*
Take Care! ***Me KEITH / D-II*** ***Love*Peace*Out***
HELLO DETROIT !! ***Me KEITH / D-II***
HERE WE GO AGAIN REPEATING HISTORY BUT HOPEFULLY WE ARE
LEARNING FROM OUR PAST “NOT TO LET IT **EVER** HAPPEN AGAIN” !!
THIS WAS A VERY IMPORTANT MAYOR THAT WE DON’T HEAR MUCH ABOUT IN DETROIT’S HISTORY ! AND HE WANTED TO DO A LOT MORE FOR “DETROITERS” THROUGH HIS LEADERSHIP AND HAVE OUR SCHOOLS TEACH MORE THAN THE 3-Rs. THIS Is; ***“DETROIT’S HISTORY”***.
THIS ALSO EXPLAINS WHY THEY WANT TO CLOSE OUR SCHOOLS AND LIBRARIES??? “THEY DIDN’T WANT THEM (Any Race) TO LEARN THEN, THEY DON’T WANT ANYONE (Us) TO LEARN NOW”.
JUST INVESTIGATE, CHECK THIS OUT, AND WHAT DO YOU THINK???
Take Care!! ***Me KEITH / D-II*** ***Love*Peace*Out*** !
Hey Dianne,
As always, thanks for your dedication to Detroit. Here’s a couple additional points. Wall Street’s political (as opposed to straight up financial) bond ratings for DWSD is also connected to the anti-union aspects of Cox’s order. They are expressing confidence in their ability to ram through whatever profit-turning schemes they have in mind unimpeded by Local 207 (only guess what, we ain’t dead yet). Secondly, Cox’s order negates the need to have an EM sell DWSD. Cox’s order gives Fausone, the Water Board and the new Director unlimited rights to sell assets of DWSD, without the interference of the city charter, union contracts, elected officials, or for that matter, state courts. Finally, if Cox gets away with this, no union, public or private sector, will be safe from right wing federal judges anywhere. More finally, the petition campaign against the EM law is mostly a diversion to pull us away from building a movement independent of the democrats, and into the dead end ballot box. It reminds me of the dems, including detroit dems, “opposition” to Prop 2. More about public positioning for the next GOV campaign rather than fighting to win. Or when Al Garrett diverted the 2009 fight against Bing toward a useless campaign to vote for Barrow. Take care.