News / Economy

City of Detroit Files for Bankruptcy

State-appointed emergency manager Kevyn Orr enters a news conference in Detroit July 18, 2013.State-appointed emergency manager Kevyn Orr enters a news conference in Detroit July 18, 2013.
x
State-appointed emergency manager Kevyn Orr enters a news conference in Detroit July 18, 2013.
State-appointed emergency manager Kevyn Orr enters a news conference in Detroit July 18, 2013.
Kane Farabaugh
Detroit, Michigan filed for bankruptcy in U.S. federal court on Thursday, making it the largest municipality in U.S. history to seek Chapter 9 protection. The filing is the latest move that comes after years of population decline and decreasing tax revenues in a city plagued by corruption and financial mismanagement.
 
The decision to seek bankruptcy protection comes as Detroit finds itself under the direction of a state-appointed emergency manager, Kevyn Orr.  He is trying to address an annual budget deficit of more than $300 million, and long-term debt that has soared to $20 billion.
 
But Michigan State University professor Eric Scorsone says Detroit’s path to bankruptcy did not occur overnight.
 
“It was a one-industry city. Unlike Chicago, New York and other cities that had economic diversity, Detroit really didn’t.  It had the auto industry, it had suppliers to the auto industry, and so as those went away, the city began a very long decline that’s really occurred over 50 years essentially,” says Scorsone.
 
At Detroit’s peak in the early 1950s, the population was at 1.8 million residents.  By 2010, it was down to around 700,000, with people fleeing the city amid racial tensions and declining job opportunities. 
 
The skyline of downtown Detroit is seen in this January 30, 2013, file photo.The skyline of downtown Detroit is seen in this January 30, 2013, file photo.
x
The skyline of downtown Detroit is seen in this January 30, 2013, file photo.
The skyline of downtown Detroit is seen in this January 30, 2013, file photo.
Wayne State University urban planning professor Robin Boyle says most of Detroit’s residents moved to the suburbs, or left the state altogether.
 
“They have so little disposable income to reinvest in their communities, that if they have money they leave, they go to the suburbs or they go to find work elsewhere, putting us into this vicious cycle that drives us further and further down. How you break that is the challenge in Detroit,” says Boyle.
 
In just the last decade, a bad situation in Detroit worsened as the industry that gave it the nickname “The Motor City” found itself in the worst financial shape since the Great Depression. The problem was triggered by slowing auto sales, amid declining home values and stricter lending practices, something Michigan State University professor Eric Scorsone says hit Michigan harder than most places.
 
“I think what really happened in the last 10 years though, Michigan went through a very significant 10-year recession, really unlike the country as a whole, and that’s when elected officials should have been responding and really didn’t,” says Scorsone.
 
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
Detroit’s elected mayor at that time, Kwame Kilpatrick, became embroiled in a corruption scandal that forced him from office and ultimately landed him in jail, a distraction that added to Detroit’s mounting financial woes.
 
But Scorsone says Kilpatrick is not solely to blame for the city’s current financial issues.
 
“Any city in this situation, no matter how good the elected officials and the managers were, would have had a very difficult time. So to be fair, I think it’s both. I think it’s a combination of both mismanagement and economic decline. It’s hard to say what proportion of each, but they’re both there,” says Scorsone.
 
Wayne State University’s Robin Boyle says amid Detroit’s economic mess are signs of hope in a downtown area now known more for its urban blight than thriving city life.
 
“General Motors moved down there. The downtown is beginning to see revitalization through the activities of one or two property investors, so that has strength,” says Boyle.
 
Detroit’s Chapter 9 bankruptcy filing begins a one- to three-month period of review by a federal judge. If the process moves forward, it could be several years before Detroit officially emerges from bankruptcy.

You May Like

Scotland Vote Raises Questions of International Law

Experts say self-determination, as defined and protected by international law, confined narrowly to independence movements in process of de-colonization More

Video Whaling Summit Votes to Uphold Ban on Japan Whale Hunt

Conservationists hail ruling as a victory, but Tokyo says it will submit revised plans for a whale hunt in 2015 More

Annual Military Exercise Takes on New Meaning for Ukraine Troops

Troops from 15 nations participating in annual event, 'Rapid Trident' in western Ukraine More

This forum has been closed.
Comments
     
There are no comments in this forum. Be first and add one

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Russian Economy Reeling After New Western Sanctionsi
X
September 18, 2014 2:28 AM
A new wave of Western sanctions is hitting Russia’s economy hard. State-owned energy firms continue to bleed profits and Russia’s national currency plunged to a new low this week after the U.S. and the European Union announced new sanctions to punish Russia's aggressive stance in eastern Ukraine. But as Mil Arcega reports, the sanctions could also prove costly for European and American companies.
Video

Video Russian Economy Reeling After New Western Sanctions

A new wave of Western sanctions is hitting Russia’s economy hard. State-owned energy firms continue to bleed profits and Russia’s national currency plunged to a new low this week after the U.S. and the European Union announced new sanctions to punish Russia's aggressive stance in eastern Ukraine. But as Mil Arcega reports, the sanctions could also prove costly for European and American companies.
Video

Video Belgian Researchers Discover Way to Block Cancer Metastasis

Cancer remains one of the deadliest diseases, despite many new methods to combat it. Modern medicine has treatments to prevent the growth of primary tumor cells. But most cancer deaths are caused by metastasis, the stage when primary tumor cells change and move to other parts of the body. A team of Belgian scientists says it has found a way to prevent that process. Zlatica Hoke has more.
Video

Video Mogadishu's Flood of Foreign Workers Leaves Somalis Out of Work

Unemployment and conflict has forced many young Somalians out of the country in search of a better life. But a newfound stability in the once-lawless nation has created hope — and jobs — which, some say, are too often being filled by foreigners. Abdulaziz Billow reports from Mogadishu.
Video

Video A Dinosaur Fit for Land and Water

Residents and tourists in Washington D.C. can now examine a life-size replica of an unusual dinosaur that lived almost a hundred million years ago in northern Africa. Scientists say studying the behemoth named Spinosaurus helps them better understand how some prehistoric animals adapted to life on land and in water. The Spinosaurus replica is on display at the National Geographic museum. VOA’s George Putic has more.
Video

Video Iraqi Kurdistan Church Helps Christian Children Cope find shelter in churches in the Kurdish capital, Irbil

In the past six weeks, tens of thousands of Iraqi Christians have been forced to flee their homes by Islamic State militants and find shelter in churches in the Kurdish capital, Irbil. Despite U.S. airstrikes in the region, the prospect of people returning home is still very low and concerns are starting to grow over the impact this is having on the displaced youth. Sebastian Meyer reports from Irbil on how one church is coping.
Video

Video NASA Picks Boeing, SpaceX to Carry Astronauts Into Space

The U.S. space agency, NASA, has chosen Boeing and SpaceX companies to build the next generation of spacecraft that will carry U.S. astronauts to the International Space Station by the year 2017. The deal with private industry enables NASA to end its dependence on Russia to send space crews into low Earth orbit and back. Zlatica Hoke has more.
Video

Video Future of Ukrainian Former President's Estate Uncertain

More than six months after Ukraine's former President Viktor Yanukovych fled revolution to Russia, authorities have yet to gain control of his palatial estate. Protesters occupy the grounds and opened it to tourists but they are also refusing to turn it over to the state. VOA's Daniel Schearf reports from Mezhigirya, just north of Kyiv.
Video

Video China Muslims Work to Change Perceptions After Knife Attacks

China says its has sentenced three men to death and one woman to life in prison for a deadly knife attack in March that left more than 30 dead and 140 injured. Beijing says Muslim militants from China's restive western region of Xinjiang carried out the attacks. Now, more than six months after the incident, residents in the city are still coping with the aftermath. VOA's Bill Ide has more from Kunming.


Carnage and mayhem are part of daily life in northern Nigeria, the result of a terror campaign by the Islamist group Boko Haram. Fears are growing that Nigeria’s government may not know how to counter it, and may be making things worse. More

AppleAndroid

World Currencies

EUR
USD
0.7768
JPY
USD
108.84
GBP
USD
0.6124
CAD
USD
1.0999
INR
USD
61.042

Rates may not be current.