City of Detroit files for bankruptcy

Detroit became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.
Associated Press
Jul 18, 2013

Kevyn Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing Thursday in federal bankruptcy court.

A number of factors — most notably steep population and tax base falls — have been blamed on Detroit's tumble toward insolvency. Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.

In recent months, the city has relied on state-backed bond money to meet payroll for its approximately 10,000 employees. Orr was unable to convince a host of creditors, the city's union and pension boards to take pennies on the dollar to help facilitate the city's massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment. "Only one feasible path offers a way out," Gov. Rick Snyder said in a letter to Orr and state Treasurer Andy Dillon, approving the bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March. His letter was attached to Orr's bankruptcy filing. "The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services," Snyder wrote. "The city's creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations."

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread. He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of a bankruptcy filing.

Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than the 10 cents on the dollar under that plan.

Orr's team of financial experts put together said that proposal was Detroit's one shot to permanently fix its fiscal problems. The team said Detroit was defaulting on about $2.5 billion in unsecured debt to "conserve cash" for police, fire and other services.

"Despite Mr. Orr's best efforts, he has been unable to reach a restructuring plan with the city's creditors," the governor wrote. "I therefore agree that the only feasible path to a stable and solid Detroit is to file for bankruptcy protection."
Detroit's budget deficit is believed to be more than $380 million. Orr has said long-term debt was more than $14 billion and could be between $17 billion and $20 billion.
 

Comments

The Hero Zone's picture
The Hero Zone

Sad.

Simple Enough II

Successful turnaround with Chrysler LLC.? OMFG are You kidding me? Look how much the American plants lose to manufacturing in China in the next few years. Mark my words it will be sad.

Left Sandtown

Is the Damm beginning to break?What is going to be the fall out of this?Martial Law,or just write it off with a fake Bond.We are not far from Tuesday,that`s Solent Green Day.Bless us all Lord.

Pete

This is what happens when people blindly vote Democrat each and every election.

Self inflicted wound. They got EXACTLY what they deserved.

IT'S ME

It amazes me how people in the unions vote the way the union tells them to. Many of them never read about issues or candidates, or how the way they vote will affect their families. It's sad they can't think for themselves!

Pete

Sheeple led to the fiscal cliff by their controllers.

Again, exactly what they deserved.

The Big Dog's back

Of course it had nothing to do with the Big Corporations destroying the city, leaving behind empty buildings, polluted land and air and water and by moving to the suburbs. Nah.

Pete

They left due to the socialistic government installed by the parasite class. High taxes and crushing regulations brought about Democrats and their union puppet masters.

Study up a bit on Detroit's tax rates.

anthras

Seems strange that the Big Corporations are leaving just some cities Some maybe locating out of the country however many are just relocating in other cities. Why would they go through the expense to do that????? What do some cities offer that would cause a Corp. to do that?

The Big Dog's back

A ton of tax breaks. Cost them virtually nothing.

YoMamma

To many years of one political party rule. Just goes to show what happens when you don't have change! All Republican or all Democrat = all bad!!!

Justme...

Absolutely!!

J Cooper

50 years of liberal leadership in the city.

Pete

And they would do the same for our entire country given the chance.

The Big Dog's back

Only 1 problem with that scenario. Liberals ran the country for 40 years. Best 40 years this country ever had.

Pete

Good thing we booted them out or the entire USA would be just like Detroit: Bankrupt and a slum.

You can only live off other people's money for so long. Eventually it runs out.

The Big Dog's back

Yep, the Conservative years brought us the 1st Great Depression and the Great Recession of 2008.

Fromthe419

The problem started in 1913 with the creation of the Federal Reserve, until that point America prospered, since then inflation has killed the middle class. We were that last "honest" currency with our dollar backed by a real asset...gold. If you believe the Fed that inflation is 2 percent per year, every 20 years the dollar loses half it's value. Think about when you started driving, how many hours did you have to work for a full tank of gas, I used to fill up for 5 dollars in 1985, at minimum was back then I worked for 1 hours and 20 minutes, if I had a minimum wage today how many hours would I have to work...5 or 6 hours. This is not a D or R issue, this is a fundamental break down of our monetary policy.

Mystery_Cheese

So glad someone else 'gets it'. A few of the other posters here could learn from you. It's never been a Democrat or Republican issue, but the media would like people to think so, in order to keep them fighting and distracted from the real issue.

digger nick

Obama "I saved Detriot" LOL Lets hope Obamanomics don't dave any other towns LMAO

grumpy

The controller got to the court house minutes before the court was scheduled for a TRO to stop Detroit from filing. The gov't unions were trying to keep their pensions protected. The controller got there just in time. Now the city might just have a chance to survive.

http://www.detroitnews.com/artic...|breaking|text|FRONTPAGE

fredinperkins

Institute a %.50 retail sales tax, probably for more than a year, regardless of public input. Attempt to pass an "emergency" levy for 10 years regardless of public input. Leach the money from those citizens remaining.

SamAdams

Just read today that the states and cities losing the most population are those run by Democrats. All the entitlements and other government expenses liberals seem to think is the answer turns out to be the problem, especially when those still actually paying taxes are either impoverished or driven away.

I have no sympathy whatsoever for Detroit or its entire Democrat/union population. Those who are blameless and stuck in that hellhole, though, have my most heartfelt condolences. Here's hoping they find some way out, and sooner rather than later!

donutshopguy

Met a young man from Detroit working at Cedar Point. No jobs in Detroit for young college students. This young man wants a way out. Good luck to him.

grumpy

It is safely in the courts hands now. The court will appoint an overseer to decide what is fair and equitable. Someone NOT from Detroit or Michigan. Someone who has successfully dealt with large bankruptcies before. You can be sure none of the involved parties from Detroit will be happy with the result, but Detroit will survive, unless the people vote with their feet. The suburbs will survive.

Perkins2060

Kwame Kilpatrick for Perkins Superintendant!!!

YoMamma

I love the name Kwame! Such a household name.

Darwin's choice

Just a preview of what we're all in for! Yay team Obama...!
Chicago next?

grumpy

Another reason the bankruptcy should be accepted. Those in Detroit only want to look at the short term. Sound familiar?

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“The whole foundation that brings him here is false,” Crittendon said. “We do not have a $15 [billion] or a $20 billion debt problem. We have less than a $2 billion short-term debt problem that we could manage if we just went out and collected revenues that are owed to the city; stop giving, you know, tax abatement to people who can actually afford to pay taxes.”

http://detroit.cbslocal.com/2013...

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Those who owe the city have left, went out of business, or went bankrupt. Even debt collectors won't buy Detroit's receivables.

tk

Funny how it is the red states that are receiving the most entitlements.

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