30 search results for "DPS bailout"

Cronyism, Democrats, Detroit, Elections, Government Incompetence, Michigan, Part Time Legislature, Rent Seeking, Republicans, Taxes

The DPS Bailout – An Alternative History Under Bankruptcy

by 10x25MM • July 13, 2016 • 9 Comments

A Bankruptcy Postponed Is Not A Bankruptcy Avoided

The $ 617 million PA 192 – 197 bail out package signed by Governor Snyder on 21 June (plus the $ 48.7 million emergency down payment earlier this year) will not fix the Detroit Public Schools. The culture of corruption and incompetence long fostered within DPS suggests that the new DPS – same as the old DPS, except for some liabilities – will fail miserably a few years hence in an avalanche of new liabilities. Michigan will then be left to sort out two separate DPS entities with unsustainable liabilities. This could easily occur even before Governor Snyder leaves office in 2019. Karma. Déjà vu all over again.

Governor Snyder secured the Michigan Legislature’s approval of the $ 617 million bailout by regaling them with an entirely false narrative of the aborted 1991 Richmond, CA Unified School District bankruptcy, then implying that the entire $ 3.5 billion in DPS liabilities would fall upon the taxpayers of Michigan. The Michigan Legislature’s Republicans (and our nitwit media) bought Governor Snyder’s tale hook, line, and sinker – then delivered a $ 617 million gift to DPS for its past ill behavior. The Michigan Legislature’s Democrats had the chutzpah to hold out for even more taxpayer paid goodies.

There was another, better option: bankruptcy.

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Democrats, Detroit, Government Incompetence, Michigan, Michigan Politics, Part Time Legislature, Republicans, Taxes

The DPS Bailout – Debts & Obligations

by 10x25MM • June 23, 2016 • 7 Comments

Part II - The Eventual Cost of DPS Liabilities to Michigan Taxpayers and Detroit Schoolchildren

DPS has two types of formal debt: operating and capital. Operating debt is a conversion of present and past annual operating deficits into ‘long-term notes’ sold to the financial markets, as well as more immediate debts owed to the State of Michigan directly. DPS capital debt exists only in the form of bonds which were sold to financial markets to purchase and rehabilitate facilities. DPS’ formal bonds are identified by Series, which consists of the year issued and a letter suffix when different purpose bonds are issued in a single year. The financial markets apply a further identifier, CUSIP, which is a unique identifier of municipal bonds by series and their intended dates of redemption. All of the DPS debt sold to the financial markets has been enrolled in Public Act 92 of 2005, a program designed to reduce interest rates to local school districts in accordance with the 1963 Michigan Constitution’s Article IX, Section 16. Most DPS debt is effectively secured by a general obligation to pay, which requires Detroit taxpayers to increase taxes and reduce spending should financial difficulties repaying arise.

DPS pays off its capital debt in annual installments of both interest and principal, before it pays off (or adds to) its operating debt. Bond interest and principal payments are required by bond terms which – if ignored – would result in immediate default and bankruptcy. The exact contract terms of DPS debt sold to the financial markets are laid out in official statements which detail all the formal legal and financial features of the bonds. The official statement is essentially a contract between DPS and its bond purchasers.

DPS’ operating debt payments are somewhat more flexible than capital debt payments because only a portion of operating debt has been converted into formal bonds covered by statements; much of it is separately owed to the Michigan School Loan Revolving Fund. The SSLRF can best be thought of as a State sponsored credit card. School districts tap into it when they are short of cash, and pay off their balance when they are flush. Operating debt is only converted into formal bonds when Michigan school districts exceed their limits at the SSLRF. Those limits are not exact, and generally come into play when DPS goes through one of its periodic financial spasms.

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Conservative News, Cronyism, Democrats, Detroit, Government Incompetence, Michigan, Michigan Politics, Part Time Legislature, Republicans

The DPS Bailout – The Bankruptcy Alternative Not Taken

by 10x25MM • June 21, 2016 • 1 Comment

Part I - No, The Richmond USD Case Did Not Challenge U.S. Bankruptcy Court Authority

Governor Snyder browbeat the Michigan Legislature to approve the $ 617 million bailout of Detroit Public Schools which he signed today by regaling them with a parade of horribles which would occur if the bailout was defeated and DPS was forced to file for bankruptcy. Daniel Howes regurgitated Governor Snyder’s compelling tales of impending doom delivered behind closed doors in a Detroit News article, but was any of it true?

Right at the top of Governor Snyder’s parade of horribles was the Federal bankruptcy filing of the Richmond [California] Unified School District on April 19, 1991 . Governor Snyder portrayed the outcome of this action as the U.S. Bankruptcy Court denying the petition and ordering the State of California to financially bail out the district. From Daniel Howes’ article:

There is scant precedence for school districts filing for bankruptcy, the Snyder administration found. In 1990, according to an administration letter to state Rep. Laura Cox, R-Livonia, the Richmond Unified School District in Northern California filed for bankruptcy because of $42.5 million in debt. The judge ruled the district could not be protected by the court in bankruptcy and ordered the state to provide the district with operating funds.

Nothing could be farther from the truth.

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Conservative News, Cronyism, Detroit, Elections, Government Incompetence, Michigan, Michigan Politics, Part Time Legislature, Rent Seeking, Republicans, Taxes

Quid Pro Quo: How The DPS Bail Out Passed

by 10x25MM • July 28, 2016 • 9 Comments

Pavlovian Conditioning In Michigan Politics

Michigan’s campaign finance laws were designed to expose quid pro quo donations to legislators and politicians by the individuals and groups having special interests in government actions. A particular goal of campaign finance laws was to prevent politicians from benefiting personally from their votes and actions. In the American Civics version of representative government, politicians are expected to represent their voters exclusively. Selling their votes and actions to the highest bidder creates an unresponsive, alien government in short order. Think Venezuela, Illinois, or Detroit. Where Michigan is now heading.

Political campaigns are expensive today. Consultants and media outlets are the particular beneficiaries of lavish campaign spending and have, in turn, convinced candidates that money is the sine qua non of political success. Today, you are not considered a serious candidate for the lowest rung in the Michigan political firmament – State Representative – unless you have a $ 100,000 campaign war chest.

American politicians and their special interest backers are developing a technique which directs quid pro quo donations right into politicians’ pockets. This technique is fast becoming a staple of Michigan politics and Michigan’s nitwit media have ignored this ingannation of representative government.

Michigan politicians are now morphing into vending machines that cater to the highest bidders in Lansing and Washington. This explains the passage of the PA 192 – 197 Detroit Public Schools bail out over the objections of many outraged Michigan voters.

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Michigan, Michigan Politics

DPS Down Payment A Major Mistake.

by Jason • March 29, 2016 • 20 Comments

What are these legislators thinking?

Operation ‘Can Kick’ In Full Swing. (re-posted from jasongillman.com)

Its for the children, right? HB5296, a $48.7 Million bill to get DPS through the school year, met little resistance from our state legislature, with seven senate, and only four house members opposing the final package. How could anyone vote to essentially close the doors? Its a valid question, and the intent should be considered honorable. However, an honest assessment of the overall situation can only remind us that it is with the best intent that we fail our children once again.

If the vote to hand over the money eradicated all debt, and set the course for district solvency, it would be hard to argue against such logic. However, the greater debt and liability still exists, and the precedent is set for the remaining $700,000,000 bailout that is next to come for DPS. Even that number is of questionable sufficiency, and is likely to be higher. Even with a bailout of this magnitude, it would be foolish to think it would be the end of hands out from a district that has produced 25% graduation rates, all the while receiving the highest per capita foundation payments.

And then there is the question of mismanagement being simply benign, or instead as a purposeful quest, evidenced by new indictments of a dozen prominent administrators within the district. Surely this is merely the tip of the iceberg.

Let us not forget also, that Detroit Schools represent only a part of the state’s public education apparatus. To be sure, it is not the only school district in Michigan that is facing obligations that seem insurmountable. What are we to do next when Grand Rapids Schools, Lansing, or even Traverse City Area Public Schools cry “No Mas!” throwing up their hands in futility?

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Michigan

Why Are We Bailing Out DPS Again?

by Jason • March 23, 2016 • 10 Comments

Detroit is flush with taxpayer cash.

Not its own taxpayers mind you, but nevertheless, it has a spigot it can apparently turn on at will. A Granholm era program that somehow still exists and ‘guarantees Detroit HS graduates two years of college will apparently come out of the taxes collected for schools. Even after getting the State bailout money going forward?

Duggan on Tuesday said that in the 2018-19 tax year tax dollars from the growth of the city will start to go into the scholarship fund.

“What the chamber has done is raise the money to create a bridge for that,” he said. “We can’t expect the chamber to raise scholarship money forever. This is the way that it was intended to work. They’ve done a wonderful job in the short-run. We will have funding out of the education tax in the long-run.”

The city forecasts the tax capture, once effective, would provide funding for the next two decades, ranging from $1 million per year up to $4.5 million projected in 2035, according to property value estimates rooted in the city’s bankruptcy Plan of Adjustment.

Money is fungible.

Check.

Ask your legislator how they could allow this to go on.

H/T 10x25MM

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Cronyism, Detroit, Government Incompetence, Michigan, Michigan Politics, Taxes

Detroit Schools Bailout Opposed

by Jason • March 8, 2016 • 22 Comments

MRG Poll Shows Michigan Voters Strongly Oppose Using Taxpayer Money for DPS’ $715 Million Bailout.

Some information from the Michigan Association of Public School Academies

MAPSA notes that the the poll is very timely, because the bailout is up for a vote today.

As expected, Michigan voters strongly oppose using taxpayer money to pay off the Detroit Public Schools’ $715 million in debt, according to a new poll by the Marketing Resource Group (MRG). The poll of 600 likely Michigan voters, commissioned by the Michigan Association of Public School Academies, was conducted Feb. 22-27.

Statewide, only 33 percent of voters favor using taxpayer money to pay off DPS’ debt, while 56 percent oppose it (with most of those saying they “strongly” oppose it). Even among Detroit voters, sentiments are almost evenly split, with 40 percent favoring the bailout and 38 percent opposing it. In the entire Metro Detroit region, the bailout also isn’t popular, with only 37 percent favoring it and 52 percent opposing it.

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Cronyism, Democrats, Detroit, Government Incompetence, Michigan, Michigan Politics, Rent Seeking, Sports, Taxes

Battles of the Lower Depths in Detroit

by 10x25MM • June 25, 2017 • 4 Comments

Davis et al v. Detroit Downtown Development Authority et al; U.S Eastern District of Michigan Case Number: 2:17-cv-11742

Eastern District of Michigan U.S. District Judge Mark A. Goldsmith ruled on June 19^th that Detroit’s Downtown Development Authority can issue $34.5 million in bonds to pay for the relocation of the Detroit Pistons basketball team to the new Little Caesar’s Arena. The Judge’s ruling rejected arguments that the eventual use of school tax money to repay these tax increment finance bonds violates Detroit residents’ constitutional and statutory right to vote on a school tax money diversions.

Judge Goldsmith’s ruling denied Robert Davis‘ and D. Etta Wilcoxon’s motion for a preliminary injunction or temporary restraining order in their lawsuit against the Detroit Downtown Development Authority. The Judge said the plaintiffs did not establish the need for an emergency injunction. The Judge politely neglected to mention that Robert Davis was sentenced in the very same Eastern District U.S. District Court to an 18 month Club Fed vacation for stealing $ 200,000 from the Highland Park School District in 2014. Mr. Davis should still be on probation for this minor peccadillo.

One complication here is that the tax monies being diverted are not those of the current Detroit Community Public School District, but rather those of the legacy Detroit Public School District which was reduced to zombie status last year in the DPS bailout. Is the old DPS really a school district today, or just a financial entity? The Detroit Community Public School District is a near bankrupt ward of the State of Michigan that won’t receive any Detroit property tax revenues until the legacy DPS district debts are paid off. No one alive today will live to see that.

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Conservative News, Democrats, Detroit, Government Incompetence, Michigan, Michigan Politics, Part Time Legislature, Pensions & Retirement Benefits, Republicans, Taxes

Financial State of Michigan – 2015

by 10x25MM • October 6, 2016 • 5 Comments

41st Place Among the States

You have probably read the Mackinac Center’s excellent works on Michigan’s government finances, much of which they release through Michigan Capitol Confidential. Top quality analyses, but parochial in the sense that they don’t place Michigan’s government finances in the context of the other American states. An Illinois 501(c)(3) organization, Institute for Truth in Accounting does, and has come up with a useful metric – taxpayer burden – by which you can rank Michigan financial status relative to the other states. No accounting degree necessary.

Suffice it to say, you will not be reading any of Truth in Accounting’s work in Michigan’s nitwit, cheerleading media.

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Conservative News, Cronyism, Democrats, Detroit, Government Incompetence, Michigan, Michigan Politics, Opinion, Rent Seeking, Republicans

Exactly whose agenda is Gov. Snyder promoting?

by KG One • July 11, 2016 • 1 Comment

"While shutting down the schools would be horrible. It is a better option than the alternative."

“This marks a new day for Detroit families, with DPS free from debt and strong accountability measures for all schools in the city that promises a brighter future for all of Detroit’s children.” – Michigan Governor Rick Snyder after signing the DPS bailout package last month.

If only that were really true.

There’s a story making the rounds here locally, that to put it mildly, I am more than a little surprised hasn’t been picked up by other media outlets around Michigan.

It seems that ~~Emergency Manager~~ Transition Manager Stephen Rhodes, Michigan Treasurer Nick Khouri, Gov. Snyder and a few select others within Michigan Government have felt that it is more important to bury some rather disturbing facts relating to Detroit Public Schools, rather than to make them public (Read: Better make sure that Michigan Taxpayers don’t EVER get wind of this!).