Former-Goldman Sachs VP: Detroit bankruptcy didn’t need to happen

April 8, 2014
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(Source: Wikimedia Commons)

(Source: Wikimedia Commons)

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.

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  • javierjuanmanuel

    Please hire better writers!

    “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.”

    Who types that as a writer and does not feel compelled to share the “why”, and then share the correct amount ?

    I read curts article, it was good, except the cliched racial spin HE HAD to insert.

    Detroit does have a spending problem we spend way more on almost everything, and do way worse at what ever we buy or work on. Look at recent media articles about our parking meters not working, 100 million in outstanding water bills, 2012 only half the town paid its property taxes, i have not seen 2013 but i know it did not get better. For about ten years or more since i was out of highschool, DPS was always drowning in debt, every year 80-100 million or more, i think it reached 200 million in a year pre robert bob. We spend allot on schools, 15,500 per year per kid. Our schools graduated half as many as terrible chicago schools. We spend more on cops, look at what houstan or atlanta spend, then compare to detroit.

    Across any number of agencies and offices and departments for over a decade the call in rate is usually more then 30% for city workers. NO ONE IS WORKING! They are all getting paid.

    Now this guy from GS might be right that had a sane honest person controlled the books, there was enough money …. caveat being if it was managed. It was managed like someone who makes 80k plenty enough to live on, but they spend like they make 340,000!

    Basically all you need to know is our legacy costs. Its 65% of the revenue goes to overly generous old pensions. Then the remaining goes to the current workers, then there is NOTHING for infastructure, and nothing for the current workers also over generous pensions. Thats why it looks like nature is reclaiming the city, and or it was the scene of a real life robot war from transformers!

    The city wants to live like it is the federal government, it cannot print money! Its books are a wreck.

    This turd from GS sounds like he is up to something, i am not sure what his angle is … but it is not helping.

  • frankthemurph

    “former Wallace Turbeville, former Goldman Sachs vice president…”

    He’s no longer himself?

  • RubyPerfecto

    Ironic to be getting writing advice from someone who uses “allot” to mean “a lot” and doesn’t follow rules for capitalization.
    I’d like to thank the Metro Times for covering topics that the main stream media seems unable to address. This is the point of journalism. Thanks for actually investigating rather then regurgitating press releases.