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.
TEXT SIZE - +
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

Multimedia Anti-Keystone XL Protests Continue

Demonstrators are worried about pipeline's effect on climate change, their traditional way of life, health and safety More

Thailand's Political Power Struggle Continues

Court gave Prime Minister Yingluck Shinawatra until May 2 to prepare her defense over abuse of power charges but uncertainty remains over election timing More

Malaysia Plane Search Tests Limits of Ocean Mapping Technology

Expert tells VOA existing equipment’s maximum operating depth is around 6 kilometers as operation continues on ocean bed for any trace of MH370 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.
Pet Kangaroo Helps Spread Environmental Messagei
X
Penelope Poulou
April 22, 2014 5:53 PM
Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pet Kangaroo Helps Spread Environmental Message

Children’s author Julia Heckathorn travels the world to learn about different ecosystems and endangered animals. She pours her knowledge into children’s books, hoping the next generation will right the environmental wrongs of our times. As in many children's books, the main character in Heckathorn's stories is an animal. Unlike those other characters, though, this one is real - a kangaroo, that lives in the author’s backyard. VOA’s Penelope Poulou has more.
Video

Video Pro-Russian Separatists Plan 'Federalization Referendum' in Eastern Ukraine

Pro-Russian separatists in eastern Ukraine say they plan to move forward next month with a referendum vote for greater autonomy, despite the Geneva agreement reached with Russia, the U.S. and Ukraine to end the political conflict. VOA's Brian Padden reports from the city of Donetsk in Eastern Ukraine.
Video

Video Pope Francis Hopes Dual Canonizations Will Reconcile Church

On April 27, two popes - John the XXIII and John Paul II - will be made saints in a ceremony at St. Peter’s Square. VOA religion correspondent Jerome Socolovsky says the dual canonization is part of the current pope’s program to reconcile liberals and conservatives in the Roman Catholic Church.
Video

Video In Capturing Nature's Majesty, Film Makes Case for Its Survival

French filmmaker Luc Jacquet won worldwide acclaim for his 2005 Academy Award-winning documentary "March of the Penguins". Now Jacquet is back with a new film that takes movie-goers deep into the heart of a tropical rainforest - not only to celebrate its grandeur, but to make the case for its survival. VOA's Rosanne Skirble reports.
Video

Video Boston Marathon Bittersweet for Many Runners

Monday's running of the Boston Marathon was bittersweet for many of the 36,000 participants as they finished the run that was interrupted by a double bombing last year. Many gathered along the route paid respect to the four people killed as a result of two bombings near the finish line. VOA's Carolyn Presutti returned to Boston this year to follow two runners, forever changed because of the crimes.
Video

Video International Students Learn Film Production in World's Movie Capital

Hollywood - which is part of Los Angeles - is the movie capital of the world, and many aspiring filmmakers go there in hopes of breaking into the movie business. Mike O'Sullivan reports that regional universities are also a magnet for students who hope to become producers or directors.
Video

Video Pacific Rim Trade Deal Proves Elusive

With the U.S.-led war in Iraq ended and American military involvement in Afghanistan winding down, President Barack Obama has sought to pivot the country's foreign policy focus towards Asia. One aspect of that pivot is the negotiation of a free-trade agreement among 12 Pacific Rim nations. But as Obama leaves this week on a trip to four Asian countries he has found it very difficult to complete the trade pact. VOA's Ken Bredemeier has more from Washington.
Video

Video Autistic Adults Face Housing, Job Challenges

Many parents of children with disabilities fear for the future of their adult child. It can be difficult to find services to help adults with disabilities - physical, mental or emotional - find work or live on their own. The mother of an autistic boy set up a foundation to advocate for the estimated 1.2 million American adults with autism, a developmental disorder that causes communication difficulties and often social difficulties. VOA's Faiza Elmasry reports.
AppleAndroid

World Currencies

EUR
USD
0.7217
JPY
USD
102.17
GBP
USD
0.5949
CAD
USD
1.1009
INR
USD
60.326

Rates may not be current.