Will the last one out of Detroit please turn the lights off?
Beset by years of mismanagement, corruption and a steep population decline, the Motor City became the largest US city to file for Municipal bankruptcy on Thursday.
The filing by a state-appointed emergency manager means that if the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.To the protests of many on the Detroit city council, Michigan's Republican governor Rick Snyder appointed emergency manager Kevin Orr back in March to oversee Motown's finances. Orr was a Maryland-based attorney who resigned from the prestigious Jones Day law firm to take the Emergency Manager position.
Snyder had determined earlier this year that Detroit was in a financial emergency and without a plan to improve things.
was unable to convince a host of creditors, including the city's union and pension boards, to take pennies on the dollar to help facilitate the city's massive financial restructuring.
Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than 10 cents on the dollar under that plan.
The filing leads to a 30 to 90 day period that will determine whether or not the city of Detroit is eligible for Chapter 9 protection, and define the number of claimants who may compete for Detroit’s limited settlement resources. The petition seeks protection from unions and creditors who are renegotiating $18.5 billion in debt and liabilities, according to the Detroit Free Press.
Besides rapid depopulation and a massive public employee pension shortfall, the city of Detroit fell into further financial disarray when former Mayor Kwame Kilpatrick took office and started awarding overly-generous city contracts to unqualified friends and ran up more than $210,000 on a city-issued credit card for meals, travel and alcohol.
It should also be worth pointing out that Detroit hasn't had a Republican since 1962.