By now, the dire - and very sad - situation facing the bankrupt city of Detroit is fairly well-known to everyone in America.
The city, once home to millions, is now a shell of its former self, with houses being burned down for sport, residents decamping for more solvent parts - heck, even the pigeons have left, according to Charlie LeDuff's book, Detroit: An American Autopsy.But while Detroit may be down, there are some who believe it isn't quite out. After all, it still has its casinos, and those properties factor heavily into a plan to attempt the bankrupt berg's fiscal ship, Reuters reported this week.Plans can't move forward due to hangups with previous dealDetroit, or Motor City, as it is colloquially known, has three casinos, which voters in Michigan approved back in 1996.
And while many recognize that the casinos are now one of the only viable sources of revenue in the once prosperous city, unfortunately the much-needed cash the properties generate is inaccessible to the city, thanks to a bond deal struck in the mid-2000's.
In short, Detroit gambled on its casinos and lost, essentially putting up the casino revenue as collateral when its bond bet went bad in the face of plummeting interest rates. To fend off a payment of $400 million, according to Reuters, Detroit instead offered up the casino revenue to the banks who came knocking.
Kevyn Orr, who serves as the emergency manager for the beleaguered city, said last summer, "Every day that we don't have access to casino revenue, we cannot make the necessary investment in this city to provide for the health, safety and welfare of the citizens."Judge's rejection likely to slow city's emergence from bankruptcyOrr has been working with the banks in an effort to reduce the amount owed. Had his plans gone through, the city might have been on track to exit bankruptcy by the fall, however last week a federal judge handling Detroit's Chapter 9 bankruptcy case, Steven Rhodes, shot down Orr's plan, reportedly because he believes the banks ought to offer further reductions.
Detroit takes in about $180 million annually thanks to its three land-based casinos, which Orr described as Motor City's "most stable source of money."
For his part, Judge Rhodes said that putting up the casino revenue as collateral may not have been legal under Michigan law, meaning that there may be a path to invalidation of the deal.
Before Detroit can enter into any new deal that has to do with the casino revenue - the city's third-largest money stream behind state revenue and city income taxes - Judge Rhodes said he will need to sign off on it to ensure the money is handled appropriately.
Detroit is the largest city in the United States ever to declare bankruptcy, and has often been mentioned in the same breath as the state of Illinois in terms of political corruption and financial impropriety. For anyone who has any knowledge of Land of Lincoln politics - not to mentions the state's dreadful fiscal problems - that is not exactly a compliment.
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