Thoughts and Opinions On Today's Important Issues

Tuesday, April 07, 2009

Detroit Schools Can Teach Us A Lesson

Fiscal irresponsibility. That’s the name of the game. I’m tired of being frugal and watching my pennies. Let us spend, spend, spend!

Let's get with it. There's a new economy out there. Why are we living in the past?
  • "it has to be world class and in such a way to make other cities envious about Windsor”

Sit down and take a deep breath before you read this BLOG. I do not want you to be shocked at what I have to say since it is a huge departure from what you would expect me to Blog. I do not want you to spill coffee on yourself and get scalded so that I get the blame for it.

Back in my law firm days, one of my areas of expertise was bankruptcy law. I remember handling a file for a client. It was clear that their customer knew that he was going bankrupt and did not care. What he did was “max out” every single one of his credit cards including VISA, Master Card, American Express and so on as well as every Department Store Credit card that he had including some very high end ones in Toronto. He ran up huge debts buying all kinds of luxury items, taking trips and going to the finest restaurants. Then he declared bankruptcy. When I got the file, he was seeking to be discharged from bankruptcy and, of course, I recommended to my client that he oppose it just out of principle.

He enjoyed the good life, suffered a minor set-back and was ready to start all over again.

I thought about this because of two news stories that came out of Detroit that bothered me given the size of the deficits:

Here is one:

  • Detroit schools plan new round of closings, layoffs

    The Detroit Public School District's "emergency financial manager" has announced that up to a third of the city's schools will be shut down over the next two years, with thousands of layoffs of teachers and staff.

    Robert Bobb was appointed by Michigan's Democratic Governor Jennifer Granholm in January to impose massive cuts in order to balance the school district's budget deficit. In a report released on Wednesday, Bobb said that the district will face a $300 million deficit by the end of the fiscal year.”

As you know also, the City of Detroit has a deficit of several hundred million dollars and its bonds have a junk bond rating such that the City is close to bankruptcy and is one of the few Cities in the United States in such dire financial straits.

The second story I heard was on the radio early Friday morning where the news reporter remarked at how clean Downtown Detroit was with not one single piece of paper lying around in the streets and the grass starting to turn green. All of her comments were to celebrate the Final Four NCAA basketball tournament that took place in Detroit last weekend. This is such a huge event and people in Detroit are celebrating it.

I got to thinking. Detroit has major problems with schools being shut down, teachers being laid off, perhaps being unable to provide all of the services that a municipality should offer to its citizens and what are they concerned about… some basketball games.

I wondered, if it was good enough for Detroit, why not for Windsor too!

Take a look at the front page of the Star on Friday. Look at what is being talked about:

  • 1) The Spitfires or rather the East End Arena
    2) The Canal
    3) The Cargo Hub at the airport
    4) Eddie’s side trip to New York to be part of receiving an award for Greenlink.

The only things really missing are the Tunnel deal and Tunnel Plaza Improvements.

Just think about it. So what if our City is a town of only 200,000 people. Our Mayor is a high flying, wheeler-dealing, world traveler, municipal entrepreneur playing with tax-payer dollars who wants to negotiate all of these fantastic deals for us to make us a world-class City I guess.

For heaven’s sake, do not look behind the curtain and ask the Wizard about jobs, roads, sewers basement flooding and utility costs… how small town-ish. Honestly, a guy with his talents did not get elected to worry about bikes on riverfront city streets or no left turns for trucks or solving taxi strikes or being concerned that City workers might walk off the job.

The arena costs supposedly 70 odd million dollars but we really suspect it costs more and will cost more because of parking problems. Effectively, this transaction has meant that we don’t have any money for years to do anything, especially if a catastrophe strikes such as businesses closing down, homes being foreclosed so that the tax base decreases.

The canal project initially costed out at around $60 million but will probably be less. Right. Oh you think it is a gamble just because the Mayor said

  • “Then we are off to the races,”


The airport transportation hub will cost so much money that all that can be said about it is

  • “Federica Nazzani also said it would take “a considerable amount of capital investment to enable us to take advantage of the opportunities that exist.”

Since she talked about a Fortune 500 company, we have to be talking a minimum of $100 million or it won’t even get off the ground. I thought the Mayor had mentioned numbers even higher than that at one time.

As for Greenlink, while I know that Eddie wants the Senior Levels to pay for it, we are only a few hundred million dollars apart in costs between it and the DRIC road.

The Tunnel deal is a now US$100 million to protect those 5,000 commuters from the big bad private interests who may want to cement up the Tunnel while the Tunnel Plaza Improvements will cost more than $30 million of which the City’s share is a third.

I am sure that I am close to three quarters of $1 billion by now without even trying. How about throwing in $100 million for the WSO Symphony Hall and giving the Art Gallery a few bucks. I would imagine there’s a need for a million or two dollars to refurbish the Capitol. A few more pieces of sculpture for the riverfront would be nice. We need to have a thriving Arts community if you want to bring in all of those rich Toronto Seniors and convince knowledge-based captains of industry to relocate here.

Forget those puny infrastructure dollars from the Senior Levels. Too many strings attached and too time-consuming to get. Who cares about shovel ready when money is no object.

That’s my point. We ought to be spending as if there is no tomorrow. We ought to be doing everything and not worrying about it. We ought to be enjoying the rush of success.

I really don’t see anyone in Detroit getting all upset so why should we. They have basketball, we have the Red Bull air races to divert our attention from reality. Heck, our Mayor gives us a vision a week so that we can strut around as the biggest small town in Canada. After all, we already have bragging rights that we are the only City in Canada that is south of the US.

Seriously what’s the worst thing that can happen to us… bankruptcy. As if that matters these days. If AIG, the banks and GM and Chrysler are verging on going broke, why can't we. We can have a "surgical" structured bankruptcy just like the one that President Obama may force GM to accept.

  • "What's good for General Motors is good for America, and Windsor too."

There is a hotly contested election for Mayor in Detroit right now and I don’t see anybody being overly concerned that the City might have to call in a Trustee.

Let’s be blunt about it. This City is in miserable shape. and it is not getting any better right now. Which City has the highest unemployment, the lowest house prices, and one of the highest vacancy rates in the country. Yet which other City in North America is fighting NOT to get $2 billion from the Senior Levels and $1 billion from private industry. In fact, we still don’t have a CEO for our Development Commission and who knows if we will ever get one to diversify our economy away from the collapsing automobile industry.

Let’s spend that money folks. Let’s pile on the debt. It does not matter. In fact, the worse things get here, the better it is for us. Let me remind you of the following piece of legislation:

  • Municipal Affairs Act

    9. (1) The Ministry, upon its own initiative or whenever requested by any municipality expressed by resolution of its council, or on a petition in writing signed by not less than fifty ratepayers assessed as owners and resident in a municipality, may direct a provincial municipal audit of the financial affairs of the municipality.

    10. The Ministry upon its own initiative may make an inquiry into any of the affairs of a municipality.

    Powers of Ministry as a result of an audit or inquiry

    14. The Ministry, as a result of an audit of the affairs of a municipality made under this Part, or as a result of an investigation or inquiry made under any general or special Act, may make such orders as it sees fit requiring the municipality to carry out, put into effect, observe, perform or enforce such matters or things as the audit, investigation or inquiry has disclosed as being necessary or desirable in the interests of the municipality or with respect to the due accounting for, collection or payment of any of its assets, liabilities, revenues, expenditures, funds or money or otherwise in any respect as the order of the Ministry may provide.


    Special municipal jurisdiction of Board

    20. (1) The Board has and may exercise the special jurisdiction and powers conferred by this Part, whenever, upon request of the Ministry or of a municipality expressed by resolution of its council, or upon request of the creditors of a municipality having claims representing not less than 20 per cent of its indebtedness, including debenture debt, it is satisfied upon inquiry that the municipality,

    (a) has failed to meet and pay any of its debentures or interest thereon when due and after payment thereof has been duly demanded;

    (b) has failed to meet and pay any of its other debts or liabilities when due and default in payment is occasioned from financial difficulties affecting the municipality; or

    (c) has or may become financially involved or embarrassed so that default or unusual difficulty in meeting debts or obligations or in providing adequate funds to meet current expenditures may ensue, or has failed to levy the necessary rates to meet current expenditures.

    Power of Board to vest control over municipal administration in Ministry

    21. (1) If upon inquiry the Board is of opinion that the circumstances so warrant or appear to render desirable, it may make such order as it considers proper or necessary to vest in the Ministry control and charge over the administration of all the affairs of the municipality as set forth in the order and to declare that thereafter and until the Board otherwise determines and orders such municipality is subject to this Part.

    Control exercisable by Ministry

    27. The Ministry with respect to the municipality and every local board thereof has control and charge over the exercise by any of them of any of their powers and over the performance by any of them of any of their duties and obligations

    Powers of Board with respect to debt

    28. (1) Where a municipality has become subject to this Part, the Board, with respect to the debenture debt and debentures of the municipality and interest thereon and with respect to any other indebtedness thereof, has power to authorize or direct,

    (a) the consolidation of the whole or any portion thereof;

    (b) the issue…of debentures … in substitution and exchange for any outstanding debentures … and compulsory acceptance of such debentures

    ((f) the postponement of or variation in the terms, times and places for payment of the whole or any portion of the debenture debt and outstanding debentures and other indebtedness and interest thereon and variation in the rates of such interest;

    (l) an interim plan, pending a final order or plan with respect thereto, which may cancel all or any portion of interest in arrear and may alter, modify or compromise the rights of debenture holders or other creditors during any period of time between the date of default and the end of the fifth year following the date of the order of the Board.

In other words folks, when we become the Canadian equivalent of Detroit with junk bond status, the Province will come in here and run this place properly. We won’t have our amateur politicians anymore pretending that they are running our City like a properly managed business.

In effect, the City will be filing a US style Chapter 11 Bankruptcy proposal wiping out most of our debt. Even though Creditors have to approve everything, what choice do they have but to accept whatever it is that is proposed.

We will have it all and will get it for only a few pennies on the dollar. It is sheer genius.

Look at that Star photo of Pamela Anderson’s friend. I bet that Larry has told our alien visitors that we do not want any rinky-dink, extra-Galactical UFO hub in Windsor. Only the best. He’ll take them to our Leader and we can show them what we can do in Windsor.

  • "Anything is feasible — if you can send people to the moon, obviously you can do this."

Stick with me, dear reader. I think this concept has legs. It will be out of this world. Bankruptcy is the new trend. We can lead Canada in something if we keep on going this way.