News / USA

Detroit Seeks Path to Solvency

Detroit Becomes Largest US City to Declare Bankruptcyi
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July 19, 2013 9:21 PM
After years of population decline, a faltering auto industry and financial mismanagement by the city's government, Detroit has filed for Chapter 9 bankruptcy protection in federal court. It's the largest municipal bankruptcy in U.S. history, with the city listing more than 100,000 creditors. As VOA's Kane Farabaugh reports that Detroit's financial fate now rests in the hands of a bankruptcy judge as a local judge tries to block the move.
After years of population decline, a faltering auto industry and financial mismanagement by the city's government, Detroit has filed for Chapter 9 bankruptcy protection in federal court. It's the largest municipal bankruptcy in U.S. history, with the city listing more than 100,000 creditors. Detroit's financial fate now rests in the hands of a bankruptcy judge as a local judge tries to block the move.

As talks broke down with some of Detroit’s major creditors, Michigan Governor Rick Snyder told reporters the state of Michigan was out of options. “The city is basically broke,” he said.

Detroit’s bankruptcy petition, filed by state appointed Emergency Manager Kevyn Orr, lists the General Retirement System and the Police and Fire Retirement System of Detroit as two of the largest creditors, with a combined $2.5 billion in unfunded liabilities.  

Orr estimates the city’s annual budget deficit at more than $300 million, with it’s long-term debt close to $20 billion. It’s money the city simply doesn't have.

“What shocked me was the tolerance of this behavior for decades. This has been going on for a very long time, and to say the least, it is at best unorthodox in terms of how these things were going,” said Orr.

Other Municipal bankruptcies in the US

  • City of San Bernardino, California filed 8/01/2012.  Debt = $46 Million
  • City of Stockton, California filed 6/28/2012.  Debt = $26 Million
  • Jefferson County, Alabama filed 1/9/2011.  Debt = $4 Billion
  • Central Falls, Rhode Island filed 8/1/2011.  Debt = $21 Million
The bankruptcy is another blow to Detroit. Resident Everett Cottrell said the city has struggled to shed its image of urban blight and  perpetual decay.

"They [outsiders] think Detroit is a dump. No respect. It's a dump now. Big old Detroit can't even handle its own business? That's sad," said Cottrell.

Leland Harrison, another resident, blames Detroit’s fiscal mess on neglect by city leaders. He sees Emergency Manager Orr’s bankruptcy filing as a last resort.

"Well, they've had enough time to straighten it out. So I guess, as they say, 'if you can't handle it yourself, someone else will.' So I guess they did," said Harrison.

Some residents are concerned city assets could be liquidated to help pay the bills, including the large collection of paintings, sculptures and historic artifacts at the Detroit Institute of Arts. One piece is the puppet "Howdy Doody" from the iconic children’s TV show of the 1950s.  

Orr tried to allay concerns. “Right now there is nothing for sale, including Howdy Doody,” he said.

But no bets are off the table. The fate of the city’s assets rests with a federal bankruptcy judge, who has yet to be appointed.

  • Inside the abandoned and decaying manufacturing plant of Packard Motor Car in Detroit, Michigan.
  • General Motors' world headquarters is the tallest building along the Detroit skyline.
  • Vacant and blighted homes in an eastside neighborhood of Detroit, Michigan.
  • Carla Lyons holds her bidders card as nearly 9,000 foreclosed Detroit area properties are being auctioned off at the International Center Building in Detroit. Picture taken October 19, 2009.
  • The inside of the abandoned "Martyrs of Uganda Catholic Church in Detroit. When a Catholic church closes, the land and buildings go back to the archdiocese. If a new tenant doesn't materialize, criminals sometimes do.
  • Tony Majka uses his iPhone to photograph inside an abandoned home in Detroit. Under the name "Tony Detroit," he's been taking photos of the city's many abandoned structures with an iPhone and posting them on Instagram. The simple shots of Detroit's desolation has earned him better than 300,000 followers.
  • June, 1983: An employee works on the assembly line at the Cadillac carmaker plant in Detroit.
  • The abandoned Packard Motor Car Company building that ceased production in the 1950's.
  • Graffiti in downtown Detroit.
  • A crushed vehicle at U.S. Auto Supply in Detroit.
  • People look for clothes at the Capuchin Soup Kitchen service center in Detroit, where hundreds of people receive food and supplies every day.
  • Christopher Dodd (L), chairman of the U.S. Senate Banking Committee and Sen. Richard Shelby (R-AL) listen to testimony from the leaders of the big Detroit automakers during hearing on a financial assistance package in Washington, December 2008.
  • Abandoned brick homes on the east side of Detroit.
  • Detroit Mayor Dave Bing (left) speaks at a news conference, July 18, 2013. State-appointed emergency manager Kevyn Orr is on the right.

Kane Farabaugh

Kane Farabaugh is the Midwest Correspondent for Voice of America, where since 2008 he has established Voice of America's presence in the heartland of America.

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by: Yoshi from: Sapporo
July 22, 2013 1:08 AM
How come Detroit has fallen to bunkrupcy? Some one would say Japanese cars has sold too much in America. Some one would say extreme open marcket has broken down Detroit's major industry. Who can say it is completely idiot to think abot to return to commercial protectionism? US must have enough domestic marcket for its firms to employ national workers, manage pubric utilities and offer welfare survices. US stands at a favorable position than us Japan in terms of tolerance to protectionism.

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