How the Financial Crisis Affected the Detroit Water Department

This financial report, prepared for the city by an outside firm, shows how the economic crisis of 2008 rapidly accelerated Detroit’s financial decline. The crisis turned what would have been a slight downward trend in city water revenues into a death spiral of debt that ultimately drove the city into bankruptcy.

During the nine fiscal years from FY 2006 through FY 2014, the reported total fund net position for the combined Water and Sewer Systems has deteriorated by approximately $1.547 billion.

The report goes on to break down this decline and what caused it, particularly bad financial “swap losses” from soured credit default swaps from the financial crisis, amounting to about $561 million, or 1/3 of the total losses. It goes on to say that DWSD would actually be operating with positive financial health if it weren’t for the crisis:

Absent occurence of these unforeseen events, the net position of the combined DWSD water and sewer funds would be comfortably over $1 billion, substantially mitigating concerns regarding the financial health of the DWSD utilities.