A new report by a state-appointed emergency manager says that the city of Detroit is broke and its financial future does not look good.
Bankruptcy attorney Kevyn Orr released his findings on Sunday. It is his first report on Detroit's finances since officially taking the job in March.
“The City of Detroit continues to incur expenditures in excess of revenues despite cost reductions and proceeds from long term debt issuances. In other words, Detroit spends more than it takes in – it is clearly insolvent on a cash flow basis,” the report reads.
The report was due within 45 days of Orr taking the emergency manager position. Some of the city’s biggest problems are the General Fund debt of $1.1 billion, the enterprise fund debt of $6 billion and an estimated $5.7 billion worth of retiree medical costs.
Orr’s report indicates that the projected budget deficit is expected to reach $386 million by the end of June, Fox News, reported.
"The City's operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption," Orr wrote. "Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st century government. A well run city will promote cost savings and better customer service and will encourage private investment and a return of residents."
Orr addressed efforts that have been made to fix Detroit’s precarious financial situation.
"Recently, tens of millions of dollars of pension funding and other payments have been deferred to manage a severe liquidity crisis at the City," Orr wrote in the report. "Even with these deferrals, the City has operated at a significant and increasing deficit. It is expected that the City will end this fiscal year with approximately $125 million in accumulated deferred obligations and a precariously low cash position."
"What is clear, however, is that continuing along the current path is an ill-advised and unacceptable course of action if the city is to be put on the path to a sustainable future."