Any hope that Detroit can recover from decades of decay and poor management evaporated as its new emergency manager, Kevyn Orr, issued a report on his first 45 days on the job. The report was so bad that it means Detroit will almost have to go bankrupt and sharply cut the amount of money owed to retirees and bond holders. It would be the largest default of an American city by far.

The Detroit Free Press said of Orr’s 45-day report:

Detroit will finish its current budget year with a $162-million cash-flow shortfall and doubts about the financial health of its pension funds, according to a new report by the city’s emergency manager that lays out the financial free fall in stark detail.

The report, mandated by the state after an emergency manager’s first 45 days in office, confirms a city in desperate shape, with costs for retiree benefits eating up a third of its budget and public services suffering as Detroit’s revenues and population shrink each year. That has led to deferment of payments and an accumulated deficit that would exceed $600 million were it not for borrowing practices the city has used to cover shortfalls.

A city that has taken out loans and moved money between funding sources “has effectively exhausted its ability to borrow,” said Kevyn Orr’s report to the state Department of Treasury.

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