Detroit's Emergency Financial Manager

Updated: Saturday, August 3 2013, 12:38 AM EDT
KALAMAZOO, Mich. (NEWSCHANNEL 3) - Detroit has reluctantly handed over the keys to the city this week to its new Emergency City Manager.

But even as renowned bankruptcy lawyer Kevyn Orr began his 18-month-term in office, there were angry protesters outside City Hall arguing that Orr's appointment is an effort to destroy democracy.

In tonight's Tom's Corner, Tom Van Howe says residents of Detroit, a city up to its forehead in debt, should instead be welcoming a chance to see what competent leadership looks like.


Detroit has been in the grip of incompetent and corrupt leadership for a long time.

Just about everyone in administration of Kwame Kilpatrick is off to prison, as well they should be.

Yet they still have their supporters. One can only guess that for those misguided souls it was something like growing accustomed to and accepting daily beatings as the norm.

Just take a look at what Detroit has become. Fifty years years ago it was one of the largest in the country with a population of 1.8 million. Now its residents number less than half that.

So many neighborhoods  have been abandoned, and the houses torn down, that 40 of the city's 139-square-miles are vacant.

Forty square miles—that's about the size of all of Boston or San Francisco.

Local and state leaders, and just about anyone else who's cared enough to take a look, have known for years that Detroit is a city in peril, desperate for a total makeover.

Instead, the city chose to operate with its collective head stuck in the sand.
How else can you explain the incredible overspending, and then all the over-borrowing to pay for all the overspending.

If you or I did that, we'd be prosecuted.

But no. Everyone watched, shook their heads, and went back to their own business. The City of Detroit apparently took  the silence as tacit approval and went merrily along its way.

As a result, Detroit's net debt-to-asset ratio is now an astonishing 33 to 1. For the record, a debt-to-assets ratio is essentially the city's total debt against its total assets.

When you add up long-term debt, what it  borrowed over the past few years to fund its pension and healthcare obligations—obligations that are not gonna go away, by the way—the city's total financial burden is about $15 billion.

It's money the city simply does not have, and is not expected to have anytime soon.

And last week the Reverend Jesse Jackson had the audacity to stand on the steps of Detroit's City Hall and do his best to turn the entire matter into a racial incident. He described the appointment of a city manager as plantation-ocracy.

Cute. Inflammatory. And wrong. Jackson would do everyone a favor by staying home.

Governor Snyder had an obligation to do something. And he did. It would have been foolhardy for him and all of us to keep looking the other way while hoping the insanity of Detroit would heal itself.

A man named Kevyn Orr is now the chief executive there. Mayor Dave Bing, who was at odds with his city council over almost everything during his three years in office, has promised to help him out.

As for me, I wish them both the best of luck. Michigan needs that city to do more than just better. It needs Detroit to do well.

In this corner...I'm Tom Van Howe.
Detroit's Emergency Financial Manager
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The focus is on what Obama and Prime Minister Shinzo Abe may say about negotiations on a wide-reaching trans-Pacific trade agreement, despite resistance from local interests on both sides to wiping out tariffs.

Sentiments on Asian markets were dampened by worries about the U.S. economy, highlighted by a surprise drop in new home sales as well as dismal earnings.

The pessimism overshadowed confirmation from the European Union that Greece achieved a primary surplus in 2013 -- what's left when interest payments are stripped out.

The dollar fell against the euro and was little changed against the yen.

Benchmark crude oil fell but remains above $101.50.


Major business and economic reports scheduled for today

WASHINGTON -- The government's weekly jobless claims report comes out today.

Also, the government will release March durable goods numbers and Freddie Mac will report weekly mortgage rates.

A slew of quarterly earnings reports will be released today.

Before the market opens, investors will hear from Aetna, Starwood Hotels & Resorts Worldwide, Altria Group, General Motors, Southwest Airlines, United Airlines, American Airlines, 3M , Caterpillar, Verizon, and UPS.

After the closing bell,, Starbucks, Visa and Microsoft will report their quarterly financial results.


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The social network says it earned $642 million, or 25 cents per share, in the January-March quarter, up from $219 million, or 9 cents per share, in the same period a year ago. Adjusted earnings were $885 million or 34 cents per share.

Facebook says its revenue was $2.5 billion, up 71 percent from $1.46 billion in the same period a year ago.

Analysts expected adjusted earnings of 24 cents per share on revenue of $2.36 billion.

Facebook says its finance chief, David Ebersman, is leaving on June 1 after five years. He'll be replaced by David Wehner, currently vice president of corporate finance and business planning.


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Texas Instruments makes semiconductors used in consumer devices and industrial equipment and is reducing its reliance on chips used in smartphones and tablets. The company said that revenue from chips that convert analog signals to digital ones and from embedded technology such as microcontrollers accounted for 84 percent of first-quarter sales. Both segments grew by double-digit percentages.

Meanwhile, revenue from everything else tumbled by 28 percent.

Net income was $487 million, or 44 cents per share, including a gain of 2 cents per share from a sale that the company had not included in previous guidance to investors. The results compared with year-ago profit of $362 million, or 32 cents per share. Revenue grew 3 percent to $2.98 billion.

For the second quarter, the company predicted that earnings would be between 55 cents and 63 cents per share on revenue of $3.14 billion to $3.40 billion.


BEIJING (AP) -- China's government says it will open 80 projects in eight state-run industries to private and foreign investors as part of efforts to make its slowing economy more efficient.

The Cabinet announcement is the latest in a series of policy changes aimed at carrying out the ruling Communist Party's promises to give entrepreneurs and foreign investors a bigger role in the state-dominated economy.

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Other industries cited by the statement were wind power, natural gas storage and distribution, solar power, coal, railways and port operations.


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The new rules are meant to replace the FCC's open Internet order from 2010, which was struck down by a federal appeals court in January.

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Deborah Hersman, wrapping up a two-day forum on the rail transport of oil and ethanol, said the Transportation Department shouldn't wait for the usual federal rulemaking process to run its course. She urged regulators to use their authority to issue emergency orders or interim rules to bring about tougher standards for tank cars used to haul oil and ethanol.

She said the risks of such accidents are clear and waiting will only lead to a "higher body count."

Hersman praised Canadian authorities who announced Wednesday that they banning or phasing out older, more dangerous tank cars.


NEW YORK (AP) -- The pay of Wal-Mart Stores Inc.'s outgoing CEO fell 73 percent in 2013 because he didn't get stock awards that are given in anticipation of future performance as well as a lower performance-based bonus.

The world's largest retailer gave Mike Duke, 64, a compensation package worth about $5.6 million including a base salary of $1.4 million and a performance-based bonus of $2.8 million for the fiscal year that ended on Jan. 31.

Other compensation totaled $490,090, including retirement contributions and $144,586 for personal use of company aircraft.

The AP's calculation counts salary, bonuses, perks and stock and options awarded to the executive during the year.


NEW YORK (AP) -- Warren Buffett says he disapproves of Coca-Cola's highly contested pay plan for its executives.

Buffett, the beverage maker's largest shareholder, called the plan "excessive" in an interview on CNBC after the plan was approved at the company's annual meeting.

But Buffett said Berkshire Hathaway abstained from voting against the pay plan because he believes in Coca-Cola's management and CEO Muhtar Kent.

The pay plan came under scrutiny after Wintergreen Advisers took public issue with it last month. Wintergreen CEO David Winters said the plan was a "raw deal" for shareholders that would transfer roughly $13 billion to management over the next four years. He urged Buffett to vote against the plan.

In a statement, Coca-Cola Co. says it respects Buffett's "philosophical stance on equity-based compensation."

Washington Times