Unit #7 Project This assignment is the second of a three-step process. Step 3 will be completed in Unit VIII. Using the selected government budget from Part I in the previous unit, evaluate the past

Detroit Municipality Financing

Name

Institutional Affiliation

Detroit Municipality Financing

Detroit, Michigan, has a population of approximately 700,000 people. The town is about 139 square miles. The city is the largest municipality in the state of Michigan and the 18th largest city in the United States (Census, 2022). Detroit is home to many major corporations, including General Motors, Ford, and Chrysler. The city is also home to the Detroit Institute of Arts, the Detroit Zoo, and Belle Isle Park.

The City of Detroit's budget has been in flux recently as the municipality has been grappling with several financial challenges. In July 2013, the City of Detroit filed for bankruptcy protection, becoming the largest municipality in the United States. As part of the bankruptcy proceedings, several of the city's assets, including its art collection, were sold off, as well as some of its pension obligations were restructured. The City of Detroit's budget problems has been exacerbated by several factors, including the city's declining population, the loss of manufacturing jobs, and high crime levels. The budget deficit for the fiscal year 2013 was $327 million, and the city's long-term debt was estimated to be $18 billion. To address the budget deficit, the city has implemented several austerity measures, including cuts to city services, layoffs of city employees, and the sale of city assets. The City of Detroit's revenue sources includes income taxes, property taxes, sales taxes, and charges. In recent years, the city's revenue from income taxes has declined as the city's population has declined (Massaron & Stoudemire, 2020). The loss of manufacturing jobs has also hurt the city's revenue from property taxes and sales taxes. To make up for the shortfall in revenue, the city has been relying increasingly on charges, such as water and sewer fees and fees for city services. The City of Detroit's expenditures includes costs for city services, such as police and fire protection, and costs for city employees, such as salaries and benefits. The city has also been required to make payments on its long-term debt. To address the budget deficit, the city has cut spending on city services and city employees. The city has also implemented several austerity measures, such as deferring payments on its long-term debt.

These financial difficulties could be averted utilizing exploring other financing options to increase their revenue streams. The city of Detroit could try to negotiate with its creditors to devise a plan that would allow it to restructure its debt and avoid bankruptcy. This could involve the city agreeing to pay back a portion of its debt over time, with the creditors agreeing to forgive the rest. Detroit could raise new revenue by increasing taxes or fees or selling off city assets (MTB, 2022). This could help to raise the money needed to pay back its debts and avoid bankruptcy. The city of Detroit could declare bankruptcy and try to negotiate with its creditors to devise a plan for repaying its debts. This could involve the city agreeing to pay back a portion of its debt over time, with the creditors agreeing to forgive the rest.

References

Census. (2022). Detroit city, Michigan. Retrieved from https://www.census.gov/quickfacts/detroitcitymichigan

Massaron, D. P., & Stoudemire, T. (2020, March 6). Mayor’s Proposed Budget. Retrieved from htDetroitmi.gov: https://detroitmi.gov/document/fy-2021-mayor-budget-presentation-council

MTB. (2022). Municipal Financing Options. Retrieved from https://www3.mtb.com/commercial/government-banking/municipal-financing-options