The fate of Detroit

Updated: Saturday, August 3, 2013
The fate of Detroit story image
KALAMAZOO, Mich. (NEWSCHANNEL 3) - On Wednesday, one week after it declared itself bankruptcy, the City of Detroit celebrated its 312th birthday.

Tonight, in Tom's Corner, Tom Van Howe says Detroit's troubles, decades in the making, are only just beginning.

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I'd like to be a rah-rah guy for our state's largest city. But the truth is, no matter how I twist it and turn it and shape it...I Just can't.

The City of Detroit is the result of a train-wreck 50 years in the making. We all watched it happen, one slow-motion, hair-raising leg at a time.

How many times have you seen someone shake his head and say, helplessly, "well...that's Detroit."

And there are so many things to blame it on. Blame it on incompetent or corrupt leadership. Blame it on an auto industry that seemed unable to compete with the rest of the world. Blame it on unfunded pensions.

Blame it on NAFTA that did take hundreds of thousands of jobs south. Blame it on OSHA, which required companies to spend millions to make workplaces safer. Blame it on the cost of oil from the Persian Gulf. Blame it on white flight.

Blame it on loss of tax revenue.

Blame it on what or whomever you please.

The fact is, Detroit is a gigantic mess. It is a failed city.

In 1960 it was the fifth largest, and richest, per capita, city in the country with a population of nearly two million.

Now, with a population of just 700-thousand, 60 percent of its children live in poverty. Unemployment plods along at nearly 20 percent.

Some 30-thousand current and retired city workers are wondering if they'll have any of the pension they helped pay for.

A full third of Detroit's 140-square miles—an area the size of Grand Rapids—is now vacant or desolate.

It's a city that finds it difficult to even maintain street lights.

In the city itself, there is anger and outrage at the predicament people are finding themselves in...as if they believed the city could go on borrowing and running up bills that it never intended to pay. That day is now over.

I thought the defiant column by Mitch Albom, the celebrated Free Press writer, was terrific.

"Yeah, we're broke," he wrote, "But we got up this morning and had breakfast. Yeah we're broke. But we'll carry on...We'll still be here. We're not going anywhere."

It's nice and its easy to be defiant. But its not going to pay any bills. Its not going to bring back people who've already left. It's not going to raise tax revenues. Its not going to make leaders anymore honest.

For the record...Stockton, California, declared bankruptcy 13 months ago. And its parks are reportedly populated with drug dealers, its courts with lawsuits, its business districts with boarded up windows—with little relief in sight.

Are there positive signs in Detroit? Yes.

The Tigers are in first place. Consumer Reports says the new Chevy Malibu is hands down the best car on the road in just about any price range. Private developers want to build a new soccer stadium downtown. The state has agreed to issue $450 million in bonds to help develop a new Red Wings hockey stadium—and $200 million more to help develop 45 blocks near downtown.

So yeah...some things have the patina of progress.

But bright spots aren't enough.  Detroit is in for a long painful recovery. If, in fact, its up for it. There will be no bailouts.

We know that now.

So, in a very real way, Detroit is a new frontier—an urban frontier—waiting for courageous and creative private investment to mold something new from the rubble.

We have our fingers crossed. In the meantime...Happy birthday.

In this corner...I'm Tom Van Howe.

Business News

Last Update on October 21, 2014 17:19 GMT

HOME SALES

WASHINGTON (AP) -- U.S. homes sold in September at their fastest clip this year, yet the housing market has yet to fully shake off a slowdown that began in the middle of 2013.

The National Association of Realtors says sales of existing homes rose 2.4 percent to a seasonally adjusted annual rate of 5.17 million. Still, the sales rate has dropped 1.7 percent over the past 12 months.

Investors have retreated from the market over the past year. Their departures are being offset by existing homeowners who are upgrading to more expensive properties or downsizing after having raised their children.

Rising prices through much of 2013, weak income growth and tighter credit standards have priced out many would-be buyers. Median home prices rose 5.6 percent over the past 12 months to $209,700.

STAPLES-POSSIBLE BREACH

NEW YORK (AP) -- Staples is looking into a potential credit card data breach and has been in touch with law enforcement officials about the issue.

The office supplies retailer said Tuesday that if it turns up any data discrepancies during its investigation, customers won't be responsible for fraudulent activity on their credit cards as long as it is reported in a timely manner.

"We take the protection of customer information very seriously, and are working to resolve the situation," spokesman Mark Cautela said in a statement.

Earlier this month Sears Holdings Corp. reported a breach at its Kmart stores that started last month, saying some customers' credit and debit cards may have been compromised. Other breaches have occurred at retailers including Target Corp., Supervalu Inc. and Home Depot Inc..

Shares of Staples Inc., based in Framingham, Massachusetts, slipped 3 cents to $12.27 in midday trading. Its shares have fallen 23 percent over the past year.

EARNINGS

UNDATED (AP) -- Coca-Cola and McDonald's are reporting declining profits.

Coke says its third-quarter net income was $2.11 billion, down 14 percent as beverage volume rose 1 percent, thanks to an increase in non-carbonated drinks. The world's biggest beverage maker also announced a new plan that it said will reduce costs by $3 billion a year by 2019. For this year, the company said it expects earnings per share to miss its long-term target.

McDonald's saw customer traffic fall around the world. Sales took a big hit in Asia, where a major supplier was shown on TV repackaging expired beef. In the U.S., McDonald's is fighting to hold onto customers amid shifting tastes toward food people consider more wholesome.

For the quarter, revenue declined to just under $7 billion, falling short of Wall Street expectations.

Also reporting results this morning, Verizon Communications reported lower net income but higher revenue in its third quarter, helped by strong wireless subscriber growth and demand for its FiOS Internet services.

Higher cigarette prices helped cigarette maker Reynolds American's net income rise 2.2 percent in its third quarter.

MORTGAGE RISK RULES

WASHINGTON (AP) -- New U.S. rules aimed at getting banks to take on more of the risk when they package and sell mortgage securities are being relaxed with an eye to spurring broader home lending.

Federal regulators have dropped a key requirement: a 20 percent down payment from the borrower if a bank didn't hold at least 5 percent of the mortgage securities tied to those loans on its books.

The long-delayed final rules unveiled Tuesday by six federal agencies include the less stringent condition that borrowers not carry excessive debt relative to their income.

The board of the Federal Deposit Insurance Corp. voted 4-1 Tuesday to adopt the rules.

The rules, proposed in stricter form in 2011, were mandated by the overhaul law enacted in the wake of the 2008 financial crisis.

STATE UNEMPLOYMENT

WASHINGTON (AP) -- Unemployment rates fell in 31 U.S. states in September, including many currently embroiled in tough political campaigns. The report is the final data on state unemployment before the midterm elections Nov. 4.

The Labor Department says that unemployment rates rose in 8 states and were unchanged in 11 states. That is the smallest number of states to see an increase since April.

Employers added jobs in 39 states and cut jobs in 10. South Dakota's job count changed little.

Colorado and Kentucky, two states with hard-fought Senate campaigns, experienced the biggest declines in unemployment. Colorado's fell to 4.7 percent from 5.1 percent, and Kentucky's rate dropped to 6.7 percent from 7.1 percent.

Nationwide, the unemployment rate declined to 5.9 percent in September, from 6.1 percent the previous month.

NAPROXEN RECALL

GREENSBORO, N.C. (AP) -- A North Carolina company is recalling nearly 12,000 boxes of pain relief tablets sold at Dollar Tree stores because some cartons contain a different medication that could cause allergic reactions.

Greensboro-based Contract Packaging Resources Inc. says it mistakenly placed bottles of ibuprofen inside boxes sold at Dollar Tree stores nationwide as Assured brand naproxen sodium tablets.

Some consumers buy naproxen sodium pain relievers because of allergies to ibuprofen. The packaging company says reactions that can include hives or life-threatening respiratory problems, but it hasn't received any reports of adverse reactions.

Consumers who bought 15-count boxes of 220mg Assured brand naproxen sodium tablets may return them to the store of purchase or call 336-252-3422.

CVS HEALTH-TOBACCO

CVS develops tobacco-free prescription network

First, CVS Health pulled tobacco from its store shelves. Now, it plans to make some customers think twice about filling prescriptions at other stores that still sell smokes.

The nation's second-largest drugstore chain is developing a new tobacco-free pharmacy network for clients of its Caremark pharmacy benefits management business.

The network would slap an extra co-payment on patients who fill their prescriptions at stores that still sell tobacco. That payment won't apply to prescriptions filled in the tobacco-free network, which would include CVS and Target locations nationally, as well as other pharmacies that abstain. Target Corp. gave up tobacco sales in 1996.

CVS national rivals Walgreen Co. and Rite Aid Corp. still sell tobacco.

The tobacco-free network will only be used by the pharmacy-benefit management customers that choose it.

KIMBERLY-CLARK-JOB CUTS

DALLAS (AP) -- Kimberly-Clark plans to eliminate up to 1,300 jobs as part of restructuring efforts aimed at reducing costs and making its business more efficient.

The consumer products company has 58,000 workers worldwide, according to its website.

Kimberly-Clark Corp. said Tuesday that it anticipates restructuring costs between $130 million and $160 million, after taxes. The company -- whose brands include Kleenex and Huggies -- foresees between $120 million and $140 million in savings by the end of 2017.

The restructuring is expected to be completed by 2016's end.

Kimberly-Clark also cut its 2014 adjusted profit forecast to account for the spinoff of its health care business. The Dallas company now expects an adjusted profit between $5.93 and $6.03 per share, down from its prior range of $6 to $6.15 per share. Analysts polled by FactSet expect $6.06 per share.

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