DETROIT (AP) — Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.
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.
(This version CORRECTS Corrects spelling of Orr's 1st name to Kevyn in 2nd paragraph. With AP Photos.)
Re: "Motor City" Goes Teats-Up
Posted: Thu Jul 18, 2013 9:13 pm
by Crackpot
Not really a surprised especially once it was announced just how much debt the city was in. hopefully it will relieve enough debt that it doesn't end up just destroying the city more.
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 1:44 am
by dales
GM "Motorama" 1956
When Detroit was the epicenter of a totally unsustainable lifestyle of senseless materialism and self absorbtion.
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 3:19 pm
by rubato
As opposed to the ascetic self-denial of the 1980s?
Is there any decade after WWII when the lifestyle was sustainable?
Yrs,
Rubato
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 3:27 pm
by dales
The 1980's was rube's favorite decade........he references it often.
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 3:35 pm
by Crackpot
Hey what do you expect to get when you assault his two favorite things!
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 6:36 pm
by dgs49
The only real question here is whether the City will be able to force the State of Michigan to underwrite its pension obligations. I understand there is a law that prohibits reducing vested pensions in the public sector in Michigan.
Will Barry spring to the defense of the government employee unions, the same way he did with the UAW?
There have been many articles published recently about property owners simply not paying their real estate taxes, because (a) they are not getting the promised services, and (b) the City doesn't have the resources to do anything about it. I wonder if there would be enough revenue to balance a budget (not THE budget) if revenues were where they are supposed to be.
I just have think that if they brought in some kick-ass turnaround person, and gave her the freedom to act decisively, it could develop into a good story. Detroit still has a great location and a lot of resources.
Do they have a commuter tax, with which to tax the incomes of all those GM people at the RenCen?
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 9:10 pm
by Crackpot
A half Perece t non resident tax I believe
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 9:18 pm
by Crackpot
The city has an emergency manger at the moment. He is our best hope for a. "Turnaround man" otherwise you have the mayor and the city council. We have a decent mayor right now and it looks like we will get a decent one next time. The council is another story though it is tipping slowly toward being a good group of people. (One of the bozos was trying to convince people a week or so before the acual debt numbers were released that that the cities debt problem was grossly overblown
Re: "Motor City" Goes Teats-Up
Posted: Fri Jul 19, 2013 9:41 pm
by Gob
Re: "Motor City" Goes Teats-Up
Posted: Sun Jul 21, 2013 7:17 pm
by rubato
Dodger Stadium, it should be noted, is in Los Angeles.
yrs,
rubato
PS thanks. I'd never listened to half of a KISS song before. Now I have.
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 1:41 pm
by dgs49
Since no one has stated the obvious yet, I'll give it a shot.
The financial death of Detroit is the predictable and inevitable result of decades of liberal policies, implemented by generations of DEMOCRAT politicians in a single-party, incestuous orgy of self-dealing, incompetence, and criminality, all supported and perpetually re-elected by a catatonically stupid electorate. They deserve NO SUPPORT whatsoever from the outside world, whether it be Wayne County, the State of Michigan, the Federal Government, or the United Fucking Nations.
The cornucopia of liberal stupidity in Detroit is bursting at its seams, but suffice it to say, (a) the City government has perpetually been much larger than necessary,much less efficacious than appropriate, and largely staffed by incompetent and lazy friends. relatives, and hangers on. (b) The City's employees have used "collective bargaining" to extort exhorbitant pay, benefits, and generous pensions (both as to amount and absurdly-short vesting periods) from the unwitting taxpayers, and (c) the anti-business climate has driven away not only the auto makers, but scores of other productive enterprises with high taxes, deficient services, intrusive regulations, and general governmental hubris.
Many other cities in North America have experienced "blows" at least as severe as the departure of the auto industry from Detroit (Houston, Dallas, Pittsburgh, etc), and yet have made either good or tolerable attempts to survive. Detroit "doubled down" on its many faults, ignoring decades of blazing neon signs, telling it that it had to change its ways to survive. The criminality of recent administrations contributed significantly to the demise, but it was only a matter of when, not whether, it would fail. And ironically, Detroit retains tremendous resources with which to rebuild, but the future holds only more Democrats with the same philosophy, having learned nothing. Without perpetual bailouts, the City government will simply collapse.
Like Greece (sorry Dr. Krugman), Detroit is only the first of many Eastern Liberal Bastions that will inevitably fail due to the same triad of shortcomings - and they are all entirely governed by Democrat legislatures and executives. Chicago, Baltimore, Philadelphia, Los Angeles -hell, Cali-fucking-fornia...
Democrat rule ----> financial failure. Night ---> day.
And it is spoken of as merely a coincidence. Right.
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 2:12 pm
by Big RR
In the words of Ronald Reagan, "There you go again." It's all the fault of those damned liberals and the unions who used collective bargaining; not a word about anyone else who contributed to the downfall. Not the businesses who held the city in their grasp for years, not the idiotc decisions of those businesses that led to the major part of the decline, jus those damned liberals and unions.
And of course, you mention those great "eastern liberal bastions" of Chicago (hardly eastern, perhaps midwestern?), LA (which is not eastern, except those in Hawaii and Alaska), and California which is neither a state nor eastern.
Sorry, but reality does not change just to suit the point you want to make.
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 2:15 pm
by Lord Jim
and California which is neither a state nor eastern.
Did California secede and nobody told me?
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 2:20 pm
by dgs49
California didn't secede. I just moved it.
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 2:24 pm
by Crackpot
To be fair on the whole it's still more factual than Dave's post
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 2:24 pm
by Big RR
Would that it did; it might be a nice country, especially if a few other states joined in.
Sorry, change to
California which is neither a state city nor eastern.
I apologize for the error.
Re: "Motor City" Goes Teats-Up
Posted: Tue Jul 23, 2013 7:14 pm
by rubato
The continuing demographic problem plaguing Detroit has escaped DGS's attention for 60 years now. Why disturb such absolute and perfect ignorance?
