Friends, what are our choices in modifying our position on making these scandalous payments? This is the same position of power and theft that the World Bank and IMF holds over the subjugated countries of the South. Thanks to Diane and Bankole for their reporting and editing on these articles. Charles S _________________________- Banks, state bleed DPS
By Diane Bukowski The Michigan Citizen DETROIT â While Detroit Public Schools CEO Kenneth Burnley pushes for the closing of 110 schools and the lay-offs of 5,400 employees by 2008, banks are profiting handsomely off the districtâs deficit. In 2005 alone, according to the districtâs Comprehensive Annual Financial Report for 2004, banks will be paid nearly $156 million for DPS bond issues. Almost 62 percent of that amount, or $113 million, is interest. In addition, the district borrowed $210 million in state aid anticipation notes from the Michigan Municipal Bond Authority in August 2004, according to a memorandum from Gary Olson, director of the Senate Fiscal Agency. That amount, which was to help cover the 2004 deficit, is to be repaid by August of this year. âIf the DPS does default on the $210 million of borrowing,â Olson said, âthe State Treasurer could extend the re-payment of these notes. This scenario would provide the DPS with additional FY 2005 revenues of $210 million. This is approximately the amount of additional revenue need by DPS to close out the school year without additional budget reductions.â Olson said State Treasurer Jay Rising could exercise the default option without approval by the state legislature, but said extending repayment of the bonds would require additional interest payments determined by the state. School activists have opposed the issuance of such state bonds because they are repaid out of per-pupil funding to the district, further depleting funds already cut because of enrollment losses. They say Rising and the banks have the option to forgive at least the interest on the DPS debt, to stave off mass lay-offs and school shutdowns. E-mail: [EMAIL PROTECTED] By Diane Bukowski The Michigan Citizen DETROIT â Mayor Kwame Kilpatrick marshaled financial executives to the table during a council public hearing Jan. 31 in a last-ditch attempt to get the body to approve a bond to fund pensions. âIt took a lot to get them here,â said the cityâs chief financial officer, Sean Werdlow. Werdlow objected loudly when Councilwoman Sharon McPhail got a representative of Fitch Ratings, a bond rating agency, to admit his company had âfrequently been apprisedâ of the cityâs plan to use layoffs and service cutbacks to deal with a $300 million budget deficit. The representative, Joe OâKeefe, said his agency currently rates the cityâs credit as âA, with a negative outlook,â unless the city enacts those cuts. In 1992, Wall Street bond rating agencies drastically downgraded the cityâs credit after city unions voted down a ten-percent pay cut. Werdlow said 2,000 to 3,000 city employees would be laid off unless the bond deal is approved. He said it would save the city $160 million in this yearâs budget, and compared the deal to refinancing a home mortgage, from a current rate of 7.8 percent to a lower rate of 5.6 percent. Werdlow added that the city could not borrow only the money owed to the pension funds this year, but the entire $1.2 billion in liabilities owed over the next 14 years. He was directly contradicted at various times by the bond executives, who said the cityâs pension debt is a âsoft liability,â not a âhard liabilityâ like a home mortgage, and could be borrowed in annual allotments. Stephen Murphy of Standard and Poorâs, however, said it would be â financially prudentâ to make the debt a hard liability. Councilwoman Sharon McPhail and George Orzech, who both sit on the cityâs Police and Fire Retirement System Board, pointed out that a âsoft liabilityâ can vary to the cityâs advantage. In previous years, Orzech said, that system was over-funded due to successful investments, eliminating the cityâs liability. Addressing Murphy, Councilwoman JoAnn Watson said, âIf the transaction is approved but the stock market goes south in the following years, what would that do to the cityâs bond rating?â Watson cited negative factors influencing the nationâs economy, including competition from automakers in China and elsewhere, and the war in Iraq. Murphy responded, âThat would be a significant problem.â He stressed that for the deal to succeed, pension boards would have to resist demands for better retiree benefits and distribution of excess profits, as with the â13th checkâ city retirees used to receive. Werdlow said the elected retiree boards would still control the distribution of proceeds from the bonds. The city council is deliberating not only on the bond issue, but also on an ordinance to form two non-profit corporations that would oversee the funds, doling them out to the boards on an annual basis. Henry Sciortino, head of the state oversight board now running the City of Pittsburgh, tried to assuage the impact of remarks he made at Kilpatrickâs economic forum Jan. 5. At the time, he had cited a pension bond deal as partially responsible for the cityâs default. During the council session, he said that the deal was â non-callable,â meaning interest rates could not be renegotiated even after they went down on the national market. That goes against Werdlowâs claim that only 10 to 15 percent of Detroitâs proposed bond deal is ânon-callable.â Councilwoman Barbara Rose-Collins said the city council should not rush to pass the bonds without exhausting other possible options. Union presidents Emily Kunze and John Riehl, representing workers in the cityâ s Water, Public Lighting, Finance and Human Resources departments, laid out some of those alternatives during the hearing. Kunze said it was the responsibility of big business to deal with the cityâs deficit. âThey got all the tax abatements,â she said. âWhat are they giving back to the community? We demand some of that money theyâre spending on the Superbowl for our services!â She said part of the problem behind the deficit is that the Kilpatrick administration failed to pay payroll taxes on time to the federal government, which has left the city with about $4 million in fines. As for the bond deal, Kunze added: âWe canât enter into a scheme like this with no guarantees. We canât gamble with Detroitâs future.â The deal was scheduled for a council vote on Feb. 2, when Council President Maryann Mahaffey is expected to return from an absence due to shoulder surgery. Bankole Thompson contributed to this report. E-mail: [EMAIL PROTECTED] _______________________________________________ Marxism-Thaxis mailing list Marxism-Thaxis@lists.econ.utah.edu To change your options or unsubscribe go to: http://lists.econ.utah.edu/mailman/listinfo/marxism-thaxis
