Detroit Pensions: We Cannot Pay It

A huge amount of blame for Detroit’s problems goes to the politicians that kept making pension promises without backing them up as a sound fiduciary would. Michael Corkery writes:

Detroit’s road to financial ruin started decades ago with city leaders agreeing to generous pension benefits, which were managed by boards with overly optimistic projections for investment gains, state officials say.

Detroit officials failed to anticipate how the drastic loss in revenue coming into city coffers from local taxes and state aid would drain the funds’ assets. State officials say that the funds performed poorly as a result of mismanagement, and federal investigators have probed their operations in an continuing criminal investigation.

Of the city’s $18 billion in long-term liabilities, $3.5 billion is now owed to city pensions, while another $6.4 billion is owed to fund other employee benefits, largely retiree health care.

“We cannot pay it,” Mr. [Kevyn] Orr [Detroit’s emergency manager] said in an interview Friday. “Everyone has known that for the last 20 years, and no one has wanted to deal with it.”

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E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.