Former-Goldman Sachs VP: Detroit bankruptcy didn’t need to happen
We dropped by Wayne State University’s law school this morning to hear former Wallace Turbeville, former Goldman Sachs vice president and current senior fellow at Demos, highlight a report he published on Detroit’s bankruptcy last fall. In case you haven’t read it, Turbeville’s findings don’t exactly mesh with Detroit Emergency Manager Kevyn Orr’s analysis of the city’s fiscal picture.
Speaking inside the Damon J. Keith Center for Civil Rights on the second day of the Detroit Bankruptcy & Beyond conference, Turbeville offered some pointed remarks about the largest municipal bankruptcy in the nation’s history: The way he sees it, Detroit’s bankruptcy “never had to happen, at all.”
Turbeville has contended for some time that the city’s $18 billion debt figure established by Orr is exaggerated, and, as Curt Guyette points out in Metro Times’ cover story from this week, misleading. He also reiterated his point that the city should be addressing its nearly $200 million budget shortfall, rather than long-term debt.
“The city was tipped into this situation; it was largely a [lack] of revenue,” he told the room. “Expenses weren’t the problem.”
The city, Turbeville says, had cut its operating expenses by nearly 40 percent, but it couldn’t “cut its operating budget fast enough to keep up with the decline in revenue.” And, he adds, the city’s problems were exacerbated by the level of cuts to revenue sharing from the state over the last decade — a topic highlighted in a recent report from the Michigan Municipal League.
“There’s no question of mind the the source proximate of bankruptcy was a catastrophic decline in revenue,” he says. Add on Detroit’s eviscerated tax base, as well as some horrendously complex financial deals that are the subject of an upcoming ruling this week in bankruptcy court, and that’s why Turbeville says the city had to pursue court protection — not long-term pension and health care liabilities.
Turbeville’s report was downplayed in some media circles around the time it was published and hasn’t received much local play since then. The Detroit Free Press said by ignoring the city’s debt, Turbeville ignores “the incredible complexity of Detroit’s 60-year path into Chapter 9 bankruptcy.”
The Detroit Bankruptcy & Beyond conference featured keynote speeches from Thomas Sugrue, Ponsella Hardaway of MOSES, john powell of the Haas Institue, and more. It concludes this evening.