News / USA

Detroit Becomes Largest US City to File Bankruptcy

Experts: Bankruptcy May Give Detroit Chance to Start Freshi
July 20, 2013 2:40 AM
Detroit, once the prosperous home of the U.S. auto industry, has gone bankrupt. It is the largest city in U.S. history to seek protection from creditors while it negotiates a plan to reorganize. Detroit's troubles reflect the loss of manufacturing jobs and much of its population and tax base. Despite legal wrangling over the filing, experts look at how Detroit's bankruptcy compares with other financially troubled municipalities. Mil Arcega has more for VOA.
Mil Arcega explains how Detroit's bankruptcy compares with other financially troubled municipalities.
VOA News
Detroit, once the symbol of American industrial power, has become the largest city in U.S. history to file for bankruptcy, a victim of its declining population and faltering auto industry.
A half-century ago, Detroit stood at the center of the country's booming auto industry and boasted a population of 1.8 million people, many of them assembly line factory workers drawn to the city by wages that led to a middle-class life. But when a state-appointed fiscal manager filed the city's bankruptcy papers Thursday, Detroit's population had dwindled to 700,000. Many of its neighborhoods are deserted and houses boarded up.
The bankruptcy filing gives the city protection from its creditors. Detroit Mayor Dave Bing said he hopes the move will mark a new beginning for the city, which has been struggling with a budget deficit of more than $300 million and long-term debt that may total $18 billion or more.

  • 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.

​"This is a very, very difficult day for me as I am sure it is for a lot of our citizens here in the city of Detroit," he said. "When I took office over four years ago, I said Detroit was in a financial crisis and we tried to work our way through this situation over the last four years. But it has been very, very difficult."
In March, Michigan Governor Rick Snyder hired fiscal manager and bankruptcy expert Kevyn Orr to oversee Detroit's troubled finances, making it the largest U.S. city under state supervision. Orr said it soon became obvious that Detroit was on an unsustainable financial path.

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 reality is, that even a casual observer — a casual observer — has had to understand for some period of time now that Detroit simply was not on a sustainable footing, continuing to borrow, continuing to defer pension payments, continuing not to pay its bills on time, continuing a deepening insolvency."
Governor Snyder said the bankruptcy filing will give Detroit a chance to recover.
"Now is our opportunity to stop 60 years of decline," he said.
It is not entirely clear what happens next for the city. Orr said the city will maintain basic services, such as police and fire protection. But many of the city's street lights have already been cut off. The bankruptcy declaration also casts doubt about the future of public employee pensions and health care plans in Detroit, which has about 10,000 city employees.
A bankruptcy judge will be appointed to oversee the city's finances. Eventually, many of the city's creditors might only receive pennies on the dollar of the money they are owed.
Settlement of the case is expected to take a lengthy period of time, likely more than a year.

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Comment Sorting
by: Tony from: Boston, MA
July 19, 2013 1:57 PM
Debunk the Myths in Investing (from amazon):
The state employees can receive most of the salaries in retirement plus many goodies. Most are lazy or become lazy from their tiny work loads. If you work too hard, your boss will be threatened. I know as I worked for the Federal Reserve. We had pool tables, exercise rooms... I was hired because of my knowledge of a mini computer that was used in a major project. I quit as the life would be meaningless and I would become stupid and lazy as the rest of the workers.

Most are not smart (or become stupid after taking too many afternoon laps). To illustrate with accounting graduates, the smart ones go to Big 10, and the bottom ones go to work for the state. How come the stupid and lazy ones get better compensation (not to mention their long vacation days)? Most corporations do not have pension these days and they have to work hard to keep their jobs.

It extends to state and government employees not just cities. I may have offended many here esp. those government workers spending all day in surfing the net. Fight for the justice but not against those rich folks who work/study hard, take chances, save hard...

by: Ricky from: Italy
July 19, 2013 10:49 AM
It is not too big to fail?

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