Cash crisis items - Detroit and the School District of Philadelphia. note the massive school closures coming in Philly and extrapolate the loss of jobs looming !

http://www.reuters.com/article/2012/11/13/us-detroit-budget-idUSBRE8AC19T20121113

(Reuters) - Detroit is projecting it will run out of cash next month unless the state of Michigan releases money due it from a debt sale, the city told its financial advisory board.

The city's report to the board, created as part of a consent agreement Detroit approved in April, said that "absent the availability of escrow proceeds, the city will need to employ other working capital solutions to avoid liquidity crises."

Projections show the city's weekly cash flow at just $4.1 million in mid-December before dropping to a negative $4.8 million at the end of the year.

The city submitted the report to the board on Monday.

The Michigan Finance Authority sold $129 million of bonds for Detroit in August, completing a debt sale aimed at raising $137 million for the cash-strapped city. While Detroit received some of that money, Michigan Treasury officials tied the release of another $30 million this year to Detroit's progress on reforms.

"The Department of Treasury is working with city of Detroit to establish milestones that will allow the release of bond funds being held in escrow and will continue to move the city forward in an expeditious manner," Caleb Buhs, a spokesman for the department, said on Tuesday.

Detroit faced a cash crisis this summer that led to warnings it could default on some bonds, as well as to subsequent downgrades that pounded the city's credit ratings deeper into the junk category.

The cash crunch and a default were subsequently averted by the bond sale.

Detroit also told its oversight board that it began a process last week to find a restructuring adviser to aid the city in analyzing strategies for swap agreements, recommendations for long-term cash flow and other matters.

In October, Moody's Investors Service said it was keeping Detroit on review for potentially another downgrade, citing in part the possible repeal of Michigan's 2011 emergency manager law by voters on November 6. Parts of that law, which was repealed by voters, were used to craft Detroit's consent agreement.

A spokesman for Moody's said on Tuesday that the review will be concluded later this month.

Detroit Mayor Dave Bing announced on Monday that the city lost Chief Operating Officer Chris Brown, who left to join a private wind power systems company. Bing said a process to replace Brown will start immediately.

and the School district of Philadelphia sells debt for operating expenses ????

http://articles.philly.com/2012-11-09/news/34995141_1_bond-sale-charter-schools-hefty-price-tag

Philadelphia's school commission borrows $300 million to pay its bills

The Philadelphia School Reform Commission moved Wednesday to borrow $300 million - money it needs just to pay teachers, heat buildings, and buy books for the rest of the school year.

Chairman Pedro Ramos made it clear that the SRC's back was to the wall and that the state of its finances constituted "dire circumstances" for the district.

"I couldn't be more unhappy that we're in a situation where it's necessary to do a borrowing for the purposes of merely paying our bills," Ramos said.

The bond sale the SRC unanimously authorized at the Wednesday special meeting comes with a hefty price tag - an additional $22 million in debt service annually for 20 years, beginning in 2014.

It's the second time in a decade the district has had to borrow money to keep schools open - the last deficit financing occurred in 2002 - and officials say the school system's credit card is maxed out.

"Some people think the solution is that we can just keep borrowing, and we really can't," Ramos said.

Because it represents nonrecurring revenue, this bond sale puts the district hundreds of millions in the hole for the 2013-14 school year just three months into the current school term.

The message? The district's current spending is not sustainable; the bond sale is a large and very expensive Band-Aid, but it only buys the district a little time.

"Extremely difficult" choices are approaching quickly, SRC member Wendell Pritchett said, and "we're going to have to make them. We don't have any choice."

The SRC will soon be confronted with a whopper of a decision - deciding how many and which of the district's 200-plus schools should be closed.

Officials have said they must shed roughly 40 schools at the end of this year to save money and "rightsize" operations in a district that has lost tens of thousands of students to charter schools in the last decade but did not shrink operations to compensate.

Superintendent William R. Hite Jr. said Wednesday that staff would make public their school closing recommendations in the next few weeks, but possibly not until the first week in December.

In financial terms, officials said, the bond sale was successful - well received in the market, with more than 50 investors placing initial orders, said Christina Ward, deputy chief financial officer.