Detroit Files Largest-Ever Municipal Bankruptcy In U.S. History (VIDEO)
Matt | On 22, Jul 2013
One of the latest stories to get my attention was how the city of Detroit, Michigan filed for Chapter 9 bankruptcy on July 18.
The city becomes the largest ever in American history to try to rid itself of bad debt. It allows Kevyn Orr, the city’s emergency manager since March, to work with the courts to steer Detroit out of ruin. Orr was appointed by Michigan Gov. Rick Snyder to his post courtesy of the state’s Emergency Manager Law.
Michigan’s largest city has been on the brink of financial disaster for many years — racking up an estimated $19 billion in debt. One of its largest liabilities, about $9.2 billion and a contentious point in the bankruptcy filing, is the legacy pension costs of its city employees. Officials have promised that pensions won’t be touched for six months. However, the city simply cannot afford to pay its retirees at the current rate indefinitely.
That didn’t go over well with retirees. A group representing them filed a motion in an Ingham County court to stop the bankruptcy proceedings. They cite Michigan law that guarantees public retirees will receive benefits.
Detroit has long felt the sting of mismanaged funds. Some reports say that over 40 percent of the streetlights in the city are not working. Police wait times are long in neighborhoods ridden with crime and drug sales. City government is ineffective in responding to citizen complaints, etc. Abandoned houses and crumbling roads are also a common site.
Legal and political observers feel bankruptcy will give the city a fresh start. Orr is hoping to have the city out of bankruptcy by September 2014. Right now, there are lots of questions and uneasiness floating around the Motor City. Will pensions be saved? How does bankruptcy change the city dynamic? Will Detroit continue to grow and be attractive to business?
This story is far from over and we look forward to following it in the weeks and months ahead.