Courtesy of Mish.
Highland Park, Michigan is on the brink of bankruptcy. There is no other realistic way out of the fiscal mess the city is in. As is typically the case, public union pensions are at the heart of the problem.
Michigan Live reports Highland Park pensions in jeopardy if Fifth Third Bank halts loan payments.
The city of Highland Park is operating on financial fumes and the pensions of its retirees could be in jeopardy if Fifth Third, one of the banks providing loans to the municipality, cuts of the money stream.
According to the Associated Press, the bank has threatened to cut off loan payments to the city, which has prompted a legal battle that may have to be settled in court.
At this point, Highland Park is a risky investment. It’s ran nearly $500,000 over budget in 2012, the Associated Press reports, and under Public Act 436 will soon have to decide between accepting a consent order with the state, installing an emergency manager or filing bankruptcy.
In any case, the city’s creditors could face losses if the communities finances don’t recover.
Voters in Highland Park, which currently owes Detroit $18 million in water bills, voted in 2007 to take on $27 million in debt in order to maintain pension payments.
Comment of the Day
The comment of the day award goes to “Group W Bench” who responded to the Michigan Live report with: “When you already owe $18M you can’t pay, for something so vital as water, why would you agree to take on an additional $27M to cover pension payments? Why would a lender agree to loan this much money to a municipality that obviously cannot pay the debt back?“
Without a doubt the voters were stupid. So stupid, that I strongly suspect union and city official coercion to get that vote through.
Regardless, it’s going to backfire in a huge way.
Fifth Third Bank, Highland Park Lawsuit
The Detroit News reports Highland Park, bank battle over loans for pension costs.
Officials from financially strapped Highland Park and a bank providing loans to the city could appear before a federal judge after the bank threatened to halt the funds to cover pension costs.
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