News Story

Detroit's Red Ink Remains, But Future Looks Brighter

'The city emerged with a much stronger fund balance sheet post-bankruptcy'

The city of Detroit’s 2015 annual report shows that one year after emerging from bankruptcy, its general fund was in the red by $145.4 million. But a city official says this is due to one-time expenses left over from the bankruptcy process, and that Detroit’s financial footing is much stronger than in the past.

The city exited bankruptcy on Dec. 10, 2014. The latest annual report covers the period of July 1, 2014, through June 30, 2015.

According to John Naglick Jr., chief deputy CFO and finance director for the city, those one-time, bankruptcy-related spending items were significant. They included a $120 million loan repayment and $240.6 million in pension fund contributions the city made as part of the bankruptcy agreement. Detroit also had to pay $57 million in professional fees related to the bankruptcy. The one-time expenses totaled $417.6 million.

Naglick said much of this spending was offset by $529.7 million in “special gains and financing issued to settle the bankruptcy,” which increased the general fund balance by $384.3 million.

“So, the end result is that city emerged with a much stronger fund balance sheet post-bankruptcy,” Naglick said in an email.

Detroit has 16 fewer employees in 2015 than the previous year. But reducing the payroll in recent years didn’t save the city from bankruptcy. Detroit had 9,495 full-time positions in 2006 and that number decreased to 6,187 in 2014, a 35 percent drop over eight years.