Detroit goes bankrupt, largest municipal filing in U.S. history

[yota691]

Detroit goes bankrupt, largest municipal filing in U.S. history

View Photo Gallery — Detroit’s half-century of steady decline: Once known as the “Paris of the West” and home to America’s bustling auto industry, Detroit filed for bankruptcy after fighting steady decline for half a century.

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By Michael A. Fletcher, Updated: Thursday, July 18, 5:53 PM E-mail the writer

Detroit filed the largest municipal bankruptcy in the nation’s history Thursday afternoon, capping a long decline that left the nation’s automaking capital bleeding residents and revenue, while rendering city services a mess.

The nation’s fourth-largest city in the 1950s with nearly 2 million residents, the city has seen its populaton plummet to 700,000 as residents fled increasing crime and deteriorating sevices, taking their tax dollars with them.

 

 

The five-decade slide has left the city owing creditors some $19 billion and under the control of a state-appointed emergency manager. The manager has been negotiating with creditors from bond holders to pensioners to forge a plan to restructure the debt. But an agreement proved elusive as pensioners objected to benefit cuts and bond holders and insurers pressed the city to sell off assets to repay money the city borrowed to fund improvements and plug deficits.

Earlier this week, lawyers for the city’s two pension funds filed suit seeking to block Michigan Gov. Rick Snyder from authorizing a bankruptcy filing. Now, the efforts to restructure Detroit’s staggering debt will play out under the supervision of a federal bankruptcy judge, a process that could take years.

The city’s massive debt is matched only by a devastating loss of revenue and residents — a long-term condition that has escalated in recent years.

The city’s population has plummeted by 26 percent since 2000, while the unemployment rate has jumped from 7.3 percent to 18.6 percent. Property tax collections are down 20 percent and income tax collections are down by more than a third in just the past five years — despite some of the highest tax rates in the state. Even casino taxes, a bright spot in recent years, are projected to decrease because of increased competition from nearby Toledo.

All of that has led to an alarming erosion of municipal services. The city is home to nearly 80,000 abandoned and blighted structures. It recently announced plans to close 50 of its remaining 107 parks. Police response times are up to nearly an hour, and 40 percent of the city’s street lights do not work. Meanwhile, Detroit has the highest violent crime rate among the nation’s big cities.

“The best analogy I have heard for what is happening in Detroit is that this is a five-decade Katrina,” said Peter Hammer, a law professor and director of the Damon J. Keith Center for Civil Rights at Wayne State University in the city.

“Now, you either get a voluntary agreement from people holding long-term debt, or you get bankruptcy,” he added.

Orr has been searching everywhere for new revenue to help fix the problems. He has talked about spinning off the city’s water and sewer department into a separate authority. He has resurrected a proposal to lease the city’s beloved but deteriorating Belle Isle Park to the state. He also has reportedly explored selling some of the prized works owned by the Detroit Institute of Arts, as well as auctioning off a collection of vintage cars. Meanwhile, the city is working to fan an encouraging trend for young people to move downtown. Several businesses, including Quicken Loans, have also moved their operations into the city’s mostly hollow core. But for the city’s fortunes to truly be reversed, analysts say that Detroit must first get out from under a mountain of debt — even if that means bankruptcy for the city and pain for creditors.

The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities.

 

Detroit emergency manager Kevyn Orr, who in June released a plan to restructure the city’s debt and obligations that would leave many creditors with much less than they are owed, had warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.

Orr was unable to convince a host of creditors, the city’s union and pension boards to take pennies on the dollar to help facilitate the city’s massive financial restructuring. If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

“Only one feasible path offers a way out,” Gov. Snyder said in a letter to Orr and state Treasurer Andy Dillon, approving the bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things. He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March. His letter was attached to Orr’s bankruptcy filing.

“The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,” Snyder wrote. “The city’s creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.”

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread.

He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of a bankruptcy filing. 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 the 10 cents on the dollar under that plan.

Orr’s team of financial experts put together said that proposal was Detroit’s one shot to permanently fix its fiscal problems. The team said Detroit was defaulting on about $2.5 billion in unsecured debt to “conserve cash” for police, fire and other services.

“Despite Mr. Orr’s best efforts, he has been unable to reach a restructuring plan with the city’s creditors,” the governor wrote. “I therefore agree that the only feasible path to a stable and solid Detroit is to file for bankruptcy protection.”

The Associated Press contributed to this report

 

Edited July 18, 2013 by yota691

[greeneyedlady]

The first of many ?

[The Machine]

Scary times for the remaining residents ......

 

How does it work, It's obviously completely different to the way things work here ..... cities dont go bankrupt here.

 

Will Detroit end up a police run state governed from Washington or will it just become majority owned by the banks ??

[dog53]

Detroits the armpit of michigan . like chicago is the armpit of illinois .

seal it off and turn it into a big a$$ prison. All those buildings. Thats a lot of cell`s man.

Then we could start doing some real house cleaning. 

[umbertino]

Interesting, The Machine. Thanks for sharing.

 

Visited the City back in 1981.

Edited July 18, 2013 by umbertino

[SgtFuryUSCZ]

***///

 

Big auto-makers got oh, so greedy.... then the unions got greedier....

forcing the big auto-makers to get greedier still...

 

Enter the big, greedy oil companies....

 

Forcing the consumer to look to japan and to VW's from Mexico...

 

Enter big government with billions of hand-outs spurning an entire way

of life for several generations....

 

Enter the inevitable cancer that is urban blight thanks to those generations with

no responsibilities except cashing those government checks...

 

Hence - we give you DETROIT.

 

Best thing the Republican Governor just did was to tell the unions to suck it.

 

Good luck Detroit.

[waterman13]

It's happening all over the US Machine. No, they'll have to go and try to find funding, creditors get the shaft (limited payments), they can even go after contractors that they have paid in the recent past to get monies back. It's really sad how it works actually. They'll go on an austerity budget, rates for services will go up, etc. I have a county near where I live that has filed bankruptcy, it's not pretty. They'll be digging out for years, possibly decades. There is so much corruption in government, it's ridiculous!

WM13

 

Oh yeah, the government won't stop the hand outs though. "get your free Obama phone!"

Country is going to hell in a hand basket.

Edited July 18, 2013 by waterman13

[SgtFuryUSCZ]

***///

 

Scotland had their own troubles when the Coal Barons put the hard screws to them...

 

Coal Barons are murderers of a wonderful Scotsman who invented a way to break

the world's dependency on coal.

... creditors get the shaft (limited payments), ...

***///

 

Less than $1.00 per $1,000. will be their meager recovery if at all in some cases.

 

3.5 Billion dollars:

Those big pensions liabilities forced on manufacturers by the evil unions who in turn grossly mismanaged, pilfered and robbed their union members, will now be scrutinized and cut or eliminated.... going unfunded for years.

[waterman13]

***///

 

Less than $1.00 per $1,000. will be their meager recovery if at all in some cases.

 

3.5 Billion dollars:

Those big pensions liabilities forced on manufacturers by the evil unions who in turn grossly mismanaged, pilfered and robbed their union members, will now be scrutinized and cut or eliminated.... going unfunded for years.

I first found this out years ago when I was managing a company and a big client went bankrupt. They contacted us and wanted us to repay all the payments they made to us over the last 12 months if I remember correctly. We fought it, but ended up paying it. (just not fair)

That's about the time I realized a lot about corporate law.

 

Machine, if a corporation can file bankruptcy, a government can too. All governments are corporations, that's how Admiralty Law works. Common Law is near KAPUT! Nearly everything is run on Admiralty Law now. The Admiral is king, he (the court) (the Bar) makes the rules. (they are captains of their ship) Just what they have done with all men, gave them a social security number and made them a corporation, so they can have dominion over you. If you were sovereign, you are above them, not the other way around.

WM13

[The Machine]

It's happening all over the US Machine. No, they'll have to go and try to find funding, creditors get the shaft (limited payments), they can even go after contractors that they have paid in the recent past to get monies back. It's really sad how it works actually. They'll go on an austerity budget, rates for services will go up, etc. I have a county near where I live that has filed bankruptcy, it's not pretty. They'll be digging out for years, possibly decades. There is so much corruption in government, it's ridiculous!

WM13

 

It's a pity you cant just line up all those responsible and hang them ........ I bet after that these things would never happen again.

 

all the greedy corrupt and unscrupulous ones would run for the hills country wide & hopefully make room for the honest hard workers to try and make a difference.

 

I've just spent the past few minuets thinking about it .... it's a really horrible situation for anyone to be in.

[SgtFuryUSCZ]

It's a pity you cant just line up all those responsible and hang them ........

 

***///

 

That would be Queen Elizabeth Herself... 

 

and on down the line until we also see gallows in Vatican City with those cats

swinging at the end of ropes.

 

Admiralty Law is a crime against humanity...

 

Against Free Men....

 

Against the World.

[waterman13]

Preach it ladies!

 

I am sovereign!

The "Admiral" can kiss my royal Irish arse!

WM13

[SgtFuryUSCZ]

Preach it ladies!

 

I am sovereign!

The "Admiral" can kiss my royal Irish arse!

WM13

***///

we wanna be you.

[geman]

Detroit has been ran by the Dems for the last 50 thats right 50 years, WAKE THE HELL UP AMERICA!!!!!!!!!!!

[SgtFuryUSCZ]

Detroit has been ran by the Dems for the last 50 thats right 50 years, WAKE THE HELL UP AMERICA!!!!!!!!!!!

***///

 

Beautiful summation, as that's it in a nutshell right there.

 

Well said, Dude!

[SnowGlobe7]

***///

 

Big auto-makers got oh, so greedy.... then the unions got greedier....

forcing the big auto-makers to get greedier still...

 

Enter the big, greedy oil companies....

 

Forcing the consumer to look to japan and to VW's from Mexico...

 

Enter big government with billions of hand-outs spurning an entire way

of life for several generations....

 

Enter the inevitable cancer that is urban blight thanks to those generations with

no responsibilities except cashing those government checks...

 

Hence - we give you DETROIT.

 

Best thing the Republican Governor just did was to tell the unions to suck it.

 

Good luck Detroit.

 

 

Detroit..perfect example of big business karma

[Frogee]

Detroit has been ran by the Dems for the last 50 thats right 50 years, WAKE THE HELL UP AMERICA!!!!!!!!!!!

and the unions.  The government unions would not work with the people trying to solve the problems. Sacrifice is good for everyone but them.

[waterman13]

People, if you do NOTHING else, research the difference between a sovereign and a person, according to the legal definitions:

Sovereign; from Bouvier's 1856 Law Dictionary:

SOVEREIGN. A chief ruler with supreme power; one possessing sovereignty. (q. v.) It is also applied to a king or other magistrate with limited powers. 2. In the United States the sovereignty resides in the body of the people.

 

PERSON; according to Blacks 2nd Law Dictionary:

..... - artificial persons. Such as are created and devised by law for the purposes of society and government, called "corporations" or "bodies politic".

 

Think about that for a minute. I was created by God, not the government. Were you?

I AM Sovereign.

WM13

Edited July 19, 2013 by waterman13