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.
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.
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

HRW: Egypt's Trial of Morsi ‘Badly Flawed’

Human Rights Watch says former Egypt leader's detention without charge for more than three weeks after his removal from office violated Egyptian law; government rejects criticism More

Photogallery Lancet Report Calls for Major Investment in Surgery

In its report published by The Lancet, panel of experts says people are dying from conditions easily treated in the operating room such as hernia, appendicitis, obstructed labor, and serious fractures More

Music Industry Under Sway of Digital Revolution

Millions of people in every corner of the Earth now can enjoy a vast variety and quantity of music in a way that has never before been possible More

This forum has been closed.
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.
Study: Insecticide Damaging Wild Bee Populationsi
April 24, 2015 10:13 PM
A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.

Video Study: Insecticide Damaging Wild Bee Populations

A popular but controversial type of insecticide is damaging important wild bee populations, according to a new study. VOA’s Steve Baragona has more.

Video Data Servers Could Heat Private Homes

As every computer owner knows, when their machines run a complex program they get pretty hot. In fact, cooling the processors can be expensive, especially when you're dealing with huge banks of computer servers. But what if that energy could heat private homes? VOA’s George Putic reports that a Dutch energy firm aims to do just that.

Video Cinema That Crosses Borders Showcased at Tribeca Film Festival

Among the nearly 100 feature length films being shown at this year’s Tribeca Film Festival in New York City are more than 20 documentaries and features with international appeal, from a film about a Congolese businessman in China, to documentaries shot in Pakistan and diaspora communities in the U.S., to a poetic look at disaffected South African youth. VOA’s Carolyn Weaver has more.

Video UN Confronts Threat of Young Radicals

The radicalization and recruitment of young people into Islamist extremist groups has become a growing challenge for governments worldwide. On Thursday, the U.N. Security Council heard from experts on the issue, which has become a potent threat to international peace and security. VOA’s Margaret Besheer reports.

Video Growing Numbers of Turks Discover Armenian Ancestry

In a climate of improved tolerance, growing numbers of people in Turkey are discovering their grandmothers were Armenian. Hundreds of thousands of Armenians escaped the mass deportations and slaughter of the early 1900's by forced conversion to Islam. Or, Armenian children were taken in by Turkish families and assimilated. Now their stories are increasingly being heard. Dorian Jones reports from Istanbul that the revelations are viewed as an important step.

Video Migrants Trek Through Western Balkans to Reach EU

Migrants from Africa and other places are finding different routes into the European Union in search of a better life. The Associated Press followed one clandestine group to document their trek through the western Balkans to Hungary. Zlatica Hoke reports that the migrants started using that route about four years ago. Since then, it has become the second-most popular path into Western Europe, after the option of sailing from North Africa to Italy.

Video TIME Magazine Honors Activists, Pioneers Seen as Influential

TIME Magazine has released its list of celebrities, leaders and activists, whom it deems the world’s “most influential” in 2015. VOA's Ramon Taylor reports from New York.

Video US Businesses See Cuba as New Frontier

The Obama administration's opening toward Cuba is giving U.S. companies hope they'll be able to do business in Cuba despite the continuation of the U.S. economic embargo against the communist nation. Some American companies have been able to export some products to Cuba, but the recent lifting of Cuba's terrorism designation could relax other restrictions. As VOA's Daniela Schrier reports, corporate heavy hitters are lining up to head across the Florida Straits - though experts urge caution.

Video Kenya Launches Police Recruitment Drive After Terror Attacks

Kenya launched a major police recruitment drive this week as part of a large-scale effort to boost security following a recent spate of terror attacks. VOA’s Gabe Joselow reports that allegations of corruption in the process are raising old concerns about the integrity of Kenya’s security forces.

Video Japan, China in Race for Asia High-Speed Rail Projects

A lucrative competition is underway in Asia for billions of dollars in high-speed rail projects. Cambodia, India, Indonesia, Malaysia Thailand and Vietnam are among the countries planning to move onto the fast track. They are negotiating with Japan and the upstart Chinese who are locked in a duel to revolutionize transportation across Asia. VOA Correspondent Steve Herman in Bangkok has details.

Video Scientists: Mosquitoes Attracted By Our Genes

Some people always seem to get bitten by mosquitoes more than others. Now, scientists have proved that is really the case - and they say it’s all because of genes. It’s hoped the research might lead to new preventative treatments for diseases like malaria, as Henry Ridgwell reports from London.

Video Bible Museum Coming to Washington DC

Washington is the center of American political power and also home to some of the nation’s most visited museums. A new one that will showcase the Bible has skeptics questioning the motives of its conservative Christian funders. VOA religion correspondent Jerome Socolovsky reports.

Video Armenia and Politics of Word 'Genocide'

A century ago this April, hundreds of thousands of Armenians of the Turkish Ottoman empire were deported and massacred, and their culture erased from their traditional lands. While broadly accepted by the U.N. and at least 20 countries as “genocide”, the United States and Turkey have resisted using that word to describe the atrocities that stretched from 1915 to 1923. But Armenians have never forgotten.

Video Afghan First Lady Pledges No Roll Back on Women's Rights

Afghan First Lady Rula Ghani, named one of Time's 100 Most Influential, says women should take part in talks with Taliban. VOA's Rokhsar Azamee has more from Kabul.

Video New Brain Mapping Techniques Could Ease Chronic Pain

From Boulder, Colorado, Shelley Schlender reports that new methods for mapping pain in the brain are providing validation for chronic pain and might someday guide better treatment.

VOA Blogs

World Currencies


Rates may not be current.