Detroit files for bankruptcy protection

Ron Recinto

DETROIT -- Saying he "didn't want to go in this direction," Detroit Mayor Dave Bing announced the filing of Chapter 9 bankruptcy protection for the city, and that city leaders and residents "will have to make the best of it."

Detroit is now the largest municipal bankruptcy case in U.S. history.

"It's going to make the citizens better off," Bing said in a news conference "It's a new start for us."

The 16-page filing outlined several factors contributing to the city's financial woes, including a long-dwindling tax base, population flight, financial mismanagement and overall decay of a city that once had more than 2 million residents and was the world's hub of auto manufacturing.

According to the Detroit Free Press, the city is renegotiating $18.5 billion in debt. Chapter 9 bankruptcy would seek protection from creditors and unions.

Emergency Financial Manager Kevyn Orr, who was brought in earlier this year, said at the same news conference he was targeting the city to emerge from bankruptcy by late summer or fall of next year.

Michigan Gov. Rick Snyder said in a statement: "The fiscal realities confronting Detroit have been ignored for too long. I'm making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future,""This is a difficult step, but the only viable option to address a problem that has been six decades in the making."

The filing is expected largely to mirror the turnaround plan for the city that Orr introduced on June 14. Orr's proposal drew criticism from some creditors who said the proposed cuts to city services and municipal departments were too deep, according to the Detroit News. The plan also did not include the sale of city assets, like the monument-adorned island park of Belle Isle and millions of dollars in prized artworks at the Detroit Institute of Arts, the newspaper reported.

According to the federal court filing, the city has more than 100,000 creditors, more than $1 billion in assets and bills of more than $1 billion.

Snyder said the city cannot meet basic obligations to it citizens and creditors, and the "only feasible path to ensuring the city will be able to meet obligations in the future is have a successful restructuring via the bankruptcy process."

The governor noted in the filing that the city unemployment rate has nearly tripled since 2000 and more than double the national average, the city's homicide rate is at its highest 40 years and it has become one of the "most dangerous cities in America."

Citizens typically wait nearly an hour for police to respond to a call, compared to an 11-minute national average. The city's police, fire and ambulances are so old that breakdowns make it impossible to keep the fleet or properly carry out their roles.

Forty percent of the city street lights were not working in the first quarter of 2013. And the filing revealed that there are approximately 78,000 abandoned homes, business and other structures, creating public safety problems.

The filing begins a 30- to 90-day period where the courts will evaluate the petition and determine if the city is eligible for bankruptcy protection.

Orr was brought in earlier this year after Snyder declared a financial emergency for the city on March 1. Orr, a partner of the Jones Day law firm, was tasked with getting the city of approximately 700,000 residents back on track.

A spokeswoman for President Barack Obama weighed in on the matter Thursday.

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

Otha Anderson, who has lived in the city for more than 30 years, said the city's bankruptcy might be an opportunity for Detroit to turn things around.

"Hopefully, it will move the city in a positive direction," Anderson said. "And it's an opportunity for a fresh start and maybe, maybe bring new ideas to the table -- let the past be in the past."

His brother Terrance Anderson, a long-time resident who recently moved out of the city to pursue a Ph.D. at Jackson State University in Mississippi, had a different take.

“I don’t think anything will change, really,” Terrance Anderson said, "because the citizens are not involved. How can you have any real change if only a few people are sitting at the table?"
He noted that some Detroit neighborhoods are successful and vibrant because of investment from businesses and influential residents. But, he said, “They need to bolster up the neighborhoods in the surrounding areas from those areas.”

"If not, what difference bankruptcy going to mean for most of the citizens," Terrance Anderson said.

Sen. Carl Levin, D-Mich., released this statement, "Today’s news that the city has filed for bankruptcy protection saddens me, however necessary it may have been. 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.”