Detroit files for record bankruptcy

The city of Detroit filed for Chapter 9 bankruptcy on Thursday afternoon.

Detroit’s emergency manager, Kevyn Orr, filed the request to begin what will be the biggest municipal bankruptcy in United States history. Chapter 9 status would shield the municipality from some $18.5 billion in debt and other liabilities.

{mosads}The decision to file for bankruptcy required the approval of both Orr and Michigan Gov. Rick Snyder (R). Orr was appointed by Snyder to try and salvage the city’s finances, which reached a crisis point amid a steady decline in population and tax receipts.

“This was a difficult decision but I believed there were no other options,” Snyder said Thursday in a video clip.

Snyder added that the situation had been forming for 60 years.

“From a financial point of view, let me be blunt: Detroit’s broke. It’s been spending 38 cents on the dollar towards legacy costs. That number was projected to grow to 65 cents on the dollar. That’s not a sustainable situation.”

More important, Snyder added, is “poor services” being delivered to the citizens of Detroit.

“If you look at it in terms of public safety, Detroit has been on the top ten list of the most violent cities in 24 of the last 27 years,” Snyder said.

Snyder said federal bankruptcy would give Detroit an opportunity for a fresh start.

“It’s an opportunity to say let’s make realistic promises to creditors by revising those debts,” Snyder said.

The White House said President Obama is monitoring the developments in Detroit closely.

“The president and members of the President’s senior team continue to closely monitor the situation in Detroit,” White House spokeswoman Amy Brundage said in a statement.

“While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities.”

Filing
for Chapter 9 bankruptcy leaves restructuring Detroit’s finances to a
federal bankruptcy judge and Orr. The process could take years, and is likely to be contentious.

The restructuring plan is likely to follow a proposal Orr unveiled about a month earlier, The Detroit News said.

Sen. Carl Levin (D-Mich.) a native of Detroit, said he was saddened by the bankruptcy news.

“Detroit is more than a part of the state I represent in Washington. It
is my lifelong home. And so today’s news that the city has filed for
bankruptcy protection saddens me, however necessary it may have been,”
Levin said in a statement.

“But what stands out about Detroit through
the centuries is its grit and resilience. I know firsthand, because I
live in Detroit, that our city is on the rebound in some key ways, and I
know deep in my heart that the people of Detroit will face this latest
challenge with the same determination that we have always shown.”

Sen. Debbie Stabenow (D-Mich.) said she was confident the city would weather the storm.

“This is certainly one of the greatest challenges Detroit has faced in its long history, but the people of Michigan’s largest city have met and overcome tremendous challenges in the past,” Stabenow said.

“There are so many positive things happening across the city, and I have every confidence that Detroit will emerge even stronger and more resilient.”

Detroit Bankruptcy filing