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Detroit emerges from bankruptcy
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THE formalities may be over for Detroit, which officially exited bankruptcy after midnight yesterday and shrugs off the yoke of state receivership. But efforts to make the Motor City livable for residents and appealing to businesses will likely have to last for years to come.
Reducing Detroit’s crime rate, removing blight, demolishing tens of thousands of abandoned houses and finding ways to increase revenue are among the issues the city faces as it moves forward. Detroit also must work with a financial review commission on its budgets and spending.
“The reality is tomorrow’s not any different than today,” Mayor Mike Duggan said on Wednesday during the announcement that Detroit was coming out of the largest municipal bankruptcy in US history.
“We still have enormous challenges delivering the services in the city every day, but at least now we are no longer a city that’s in bankruptcy.”
State-appointed emergency manager Kevyn Orr, who filed Detroit’s bankruptcy petition in July 2013 and put together its restructuring plan, also officially stepped down as financial overseer.
The city completed the sale of US$1.28 billion in bonds on Wednesday. The money, to be repaid from tax receipts, pays off various creditors, refinances municipal debt and funds improved public services.
Orr had extraordinary authority over Detroit government for 18 months before giving most of it back to Duggan in September. Michigan Governor Rick Snyder hired Orr in March 2013 to take over Detroit’s finances. Orr filed the city’s bankruptcy petition as an effort to overcome decades of population loss, a chronic loss of tax revenue and piles of debt that couldn’t be managed.
Last month, federal Judge Steven Rhodes approved Detroit’s plan to restructure its US$12 billion debt load. It essentially removes and restructures US$7 billion of that debt, while calling for US$1.7 billion in savings and revenue over a decade to improve city services.
“What the plan of adjustment says over 10 years is if the city hits all of its budget targets and we successfully raise revenue in multiple areas and we successfully cut costs in multiple areas ... there would be US$1.7 billion in new services,” Duggan said. “Basically, it’s money that we’re going to have to earn as we produce.”
About US$440 million of that will be used to eradicate blight and help demolish the more than 40,000 houses standing vacant in Detroit neighborhoods.
Some US$430 million is promised to improve police and fire services, and response times to 911 calls. Some retirees also will see their pensions cut by 4.5 percent. Cost of living allowances were reduced for retired police and firefighters.
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