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Wednesday, June 29, 2022

Heart of the American Dream goes bust

Billions in debt,Detroit city files for bankruptcy

Written by New York Times | Detroit |
July 20, 2013 1:33:41 am


Detroit,the cradle of America’s automobile industry and once the nation’s fourth most populous city,filed for bankruptcy on Thursday,the largest American city ever to take such a course.

The decision also amounts to the largest municipal bankruptcy filing in American history in terms of debt. “This is a difficult step,but the only viable option to address a problem that has been six decades in the making,” said Governor Rick Snyder,who authorised the move after a recommendation from the emergency financial manager he had appointed to resolve Detroit’s dire financial situation. Kevyn D Orr,the emergency manager has said the debt is likely to be $18 billion and perhaps $20 billion.

For Detroit,the filing came as a painful reminder of a city’s rise and fall. “It’s sad,but you could see the writing on the wall,” said Terence Tyson,who learned of the bankruptcy as he left his job at Detroit’s municipal building Thursday. Like many there,he seemed to react with muted resignation and uncertainty about what lies ahead,but not surprise. “This has been coming for ages.”

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Detroit expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry,and then shrank in recent decades. A city of 1.8 million in 1950,it is now home to 700,000 people,and to tens of thousands of abandoned buildings,vacant lots and unlit streets. About 40 percent of the city’s streetlights do not work. More than half of Detroit’s parks have closed since 2008.

From here,there is no road map for Detroit’s recovery,not least of all because municipal bankruptcies are rare. State officials said ordinary city business would carry on as before,even as city leaders take their case to a judge,first to prove that the city is so financially troubled as to be eligible for bankruptcy,and later to argue that Detroit’s creditors and representatives of city workers and municipal retirees ought to settle for less than they once expected.

Numerous factors over many years have brought Detroit to this point,including a shrunken tax base but still a huge,139-square-mile city to maintain; overwhelming health care and pension costs; repeated efforts to manage mounting debts with still more borrowing; annual deficits in the city’s operating budget since 2008; and city services crippled by aged computer systems,poor record-keeping and widespread dysfunction.

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