Report: Detroit is not financially strong enough to handle a recession

Posted at 11:51 AM, Dec 10, 2019

DETROIT (WXYZ) — Detroit is not fiscally prepared to handle a recession of similar magnitude to 2008, according to an analysis from Moody's, a public finance group.

Detroit and Chicago are the only two of the top 25 major cities nationwide that are not prepared.

Moody's looked at these factors for each city: Fiscal volatility, reserve coverage, financial flexibility and pension risk.

Detroit's fund balance declined in the last recession, Moody's reports. However, Detroit does have the strongest reserve balance compared to the other cities, at more than 60 percent of revenue, but it is not quite enough to yield a strong overall score for recession preparedness, Moody's reports.

"The city faces continued challenges related to pensions, fixed costs, revenue volatility and capital needs," the analysis says.

However, Moody's says that Detroit has taken the following steps to prepare for a potential downturn: establishing a trust to smooth spikes in pension contributions, developing a capital improvement plan and continuing to increase its reserves. If the trends continue, the city's overall preparedness will improve.