Thursday, July 18, 2013

Detroit Files For Bankruptcy

The city of Detroit has thrown its hands up in the air and accepted defeat. After years of hand wringing over the state of affairs in the rust belt hub that has struggled in recent years perhaps more than any other large city in America, Detroit filed for bankruptcy today, becoming the largest US city to ever do so.
The decision to turn to the federal courts, which required approval from both the emergency manager assigned to oversee the troubled city and from Gov. Rick Snyder, is also the largest municipal bankruptcy filing in American history in terms of debt. Not everyone agrees how much Detroit owes, but Kevyn D. Orr, the emergency manager who was appointed by Mr. Snyder to resolve the city’s financial problems, has said the debt is likely to be $18 billion and perhaps as much as $20 billion. For Detroit, the filing comes as a painful reminder of a city’s rise and fall. Founded more than 300 years ago, the city expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry, and then shrank away in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets. [...] The decision to go to court signaled a breakdown after weeks of tense negotiations, in which Mr. Orr had been trying to persuade creditors to accept pennies on the dollar and unions to accept cuts in benefits. All along, the state’s involvement — including Mr. Snyder’s decision to send in an emergency manager — has carried racial implications, setting off a wave of concerns for some in Detroit that the mostly-white, Republican-led state government was trying to seize control of Detroit, a Democratic-held city where more than 80 percent of residents are black. [...] For some Detroiters, recent memories of bankruptcies by Chrysler and General Motors — and the re-emergence of those companies — appeared to have calmed nerves. But experts say corporate bankruptcy procedures are significantly different from municipal bankruptcies. In municipal bankruptcies, for instance, the ability of judges to intervene in how a city is run is sharply limited. And municipal bankruptcies are a form of debt adjustment, as opposed to liquidation or reorganization. Here, residents are likely to see little immediate change from the way the city has been run since March, when Mr. Orr arrived to oversee major decisions. A bankruptcy lawyer, he is widely expected to continue to run Detroit during a legal process. Mayor Dave Bing and Detroit’s elected City Council are still paid to hold office and are permitted to make decisions about day-to-day operations, though Mr. Orr could remove those powers at any point. Mr. Orr has said that as part of any restructuring he wants to spend about $1.25 billion on improving city infrastructure and services. But a major concern for Detroit residents remains the possibility that services, already severely lacking, might be further diminished in bankruptcy. In 2012, Detroit had the highest rate of violent crime in the nation for a city larger than 200,000, a report from Mr. Orr’s office showed. About 40 percent of the city’s streetlights do not work. More than half of Detroit’s parks have closed since 2008.

source: NY Times
Is it too late for the city to take Melinda Brown Duncan up on her offer to turn things around? Paging Melinda!

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