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Aug 14 2013

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Governor Snyder Playing Russian Roulette with Michigan Cities

An interesting item crossed my desk today. Michigan comes to market with transportation refunding deal

This appears to be a PR attempt by the Governor that Michigan can borrow (via bonds) and nothing will change in consideration of the fact that the Governor Snyder and his emergency manager, Kevin Orr  have included guaranteed bonds by the city of Detroit in the bankruptcy filing where investors may only get 10 cents on the dollar of their guaranteed return investment.

The amount of $10.13 million of transportation refunding bonds is peanuts compared to what is normally financed, in the range of $250 to $500 million.

Now the Governor may control a lot of things but he does not control the bond market. Financial institutions that issue bonds do and they have warned that they will charge more interest and possibly higher servicing fees bonds issued to Michigan cities in wake of the decision to included guaranteed bonds in the Detroit bankruptcy.

THOSE increased costs to cities will tickle down to guess who? The already beleaguered taxpayer in the form of increased taxes, more millages, fee etc.

And I thought the bankruptcy was going to relieve the rest of Michigan from the cost of propping up Detroit into perpetuity?

The Governor also does not control the bankruptcy judge who will issue a ruling on whether the bonds can be part of the bankruptcy filing or not  Stay tuned Michigan taxpayers…

 

 

 

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