Detroit Nearly Bankrupt, Projects Negative Cash Flow

Detroit Nearly Bankrupt, Projects Negative Cash Flow

The city of Detroit  seems to conclude the current budget year with a negative cash flow of approximately $90 million, reports Reuters. This would categorize Detroit as an almost bankrupt city, in danger of getting short of cash, as per the reports of an emergency manager who has been appointed by the state.

Play Quizzes 4

Detroit Nearly Bankrupt, Projects Negative Cash Flow

Kevyn Orr, the bankruptcy attorney, has declared his report on Sunday on the Detroit finances. Orr was appointed for the post in March. Taking the data from 2008 to 2012, expenditures have outnumbered revenue by a mean of $100 million per year. The fiscal year for the city will end on June 30.

Growing Up In The Fund Management Business: This PM’s First Stock Was A Value Stock

Invest ESG Leon CoopermanWhen portfolio managers get started in the business, their investing style often changes over the years. However, when Will Nasgovitz bought his first stock when he was 12, he was already zeroing in on value investing, and he didn't even know it. Nasgovitz has been with mutual fund manager Heartland Advisors for almost 20 years, Read More

Total cash as on April 26 was recorded at $64 million and current obligations amount to $226 million. Operations for Detroit were described as “dysfunctional and wasteful” by Orr. He cited mismanagement and declining practices in operations, along with corruption as the reason for the city’s plight.

“Therefore, the city’s net cash position was actually negative $162 million,” the report said. “The city has been deferring, and will need to continue to defer, payments on its current obligations in order to avoid running out of cash.”

The Detroit Bankruptcy Report

The report was to be submitted within 45 days after the emergency manager law of Michigan came into effect. Bill Nowling, spokesperson for Orr said that the report is an early look at the fiscal condition of Detroit.

The findings are a recent shock for the city, which was in the news in March after Gov. Rick Snyder nominated Orr to look into Detroit’s finances. At that time, speculations were made that the budget deficit would be somewhere around $327 million. The city toiled to improve its cash flow in the previous year.  Detroit is mainly dependent upon bond money, which is being held by the state for the payment of its bills.

Orr’s reports, however, revealed that the net cash position of Detroit was negative $162 million as of April 26. It is estimated that this budget deficit will reach $386 million in less than two months. Orr further said that there could be some amendments in the financial condition of the city as more data is being collected and examined.

The city of Detroit is the largest city under the control of the state of Michigan, and Orr is now commanding the finances of the city. Cash spending is done as per the command of Orr,  previously the responsibility of first-term Mayor Dave Bing and the nine-member City Council.

Updated on

Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at
Previous article Federal Reserve Plans To End Quantitative Easing
Next article Apple Inc. (AAPL): Does It Have What It Takes To Stay Ahead?

No posts to display