Yesterday, July 18th, Detroit filed for bankruptcy, becoming the largest city in the US ever to take this step.
Detroit, once seen as a symbol of the US auto industry, is now seeking protection from creditors, including public-sector workers and pension funds. It’s been decades since Detroit has begun to deal with problems connected with the declining industry and now 70,000 properties lie abandoned and public services are heading towards collapse. Mayor Dave Bing has assured that workers will receive their wages and public services will keep running.
Yesterday, July 18th, Kevyn Orr, Michigan state-appointed emergency manager, asked a federal judge to place Detroit into bankruptcy protection. If the request will be approved, he will also have permission to liquidate city assets and pay pensions and creditors. In June, the one-known Motor City, ceased unsecured-debt payments to keep the city alive, while Kevyn Orr was negotiating with creditors.
During a press conference yesterday, Mr Orr said that this move was the “first step toward restoring the city” and Detroit Mayor Dave Bing added that this would be a new start for the city’s residents.
“I really didn’t want to go in this direction – but now that we are here, we have to make the best of it,” Mr Bing said. “Paychecks for our city employees will continue, services will continue.”
Ed McNeil, who is the lead negotiator representing a coalition of 33 unions, said that this move is a ‘power grab’ and that the only purpose of this is to fix the governor’s agenda to take over the city. Michigan’s Governor Rick Snyder said that he approved the request for Chapter 9 bankruptcy as this would be the only feasible path to offer a way out and end the “cycle of ever decreasing services”.
“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. It is clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available,” he said.
What was once a manufacturing powerhouse, has become an almost deserted city with a murder rate reaching a 40-year high and debts of almost $20 billion. Over the past 10 years 250,000 residents have moved away. Other US cities which have filed for bankruptcy over the years are Stockton, Mammoth Lakes and San Bernardino from California.