Post-bankruptcy filing: What’s happening to Detroit?
After facing an estimated $18 billion debt the city of Detroit filed for bankruptcy Thursday, and has become one of the largest municipalities in American history to do so.
The decision has exposed how far the city has fallen from times when it was one of the most populated and industrialized U.S. cities.
“This is a difficult step, but the only viable option to address a problem that has been six decades in the making,” said Michigan Gov. Rick Snyder.
On a less powerful Mayor Bing
Since the bankruptcy announcement, Detroit’s mayor Dave Bing has made many appearances in an attempt to explain the city’s dismal financial situation.
“As tough as this is — I really didn’t want to go in this direction — but now that we’re here, we have to make the best of it,” Bing said Thursday evening, according to the New York Times.
Earlier this year Bing mentioned the city’s publicized money issues in his State of the City address, but held that Detroit had still made some progress. Bing remains resilient, telling ABC News that the city will “come back” from this situation.
While Bing has put on a brave face, he does not necessarily hold all the cards. Snyder and his financial appointee Kevyn D. Orr were the officials who made the final decision to seek federal bankruptcy protection, and both are expected to stand by their choice.
Disarmed by the inability to make major decisions in his city, Bing sits in a rather unconventional position. He is still the mayor, but one who has almost no say in determining Detroit’s financial future.
Detroit pension funds in jeopardy
In light of the Chapter 9 filing, the city is in conflict with those that receive pension funds.
The Detroit Free Press reports that the dispute will be settled in a federal courtroom. A hearing is set for Wednesday morning in front of U.S. Bankruptcy Judge Steven Rhodes, who will decide on the city of Detroit’s request to hold all lawsuits filed against them.
One priority lawsuit was filed by the Police and Fire Retirement System and general retirees, which, according to experts in chapter 13 bankruptcy like a chapter 13 bankruptcy attorney, called for the bankruptcy filing to be repealed because it infringes on public employee pension benefits.
The Detroit governor and financial manager have stated that pension payments will not be affected for six months, but adjustments will have to be made pending the ruling by Judge Rhodes.
This decision, which would usually be handled in a state court, could aid Detroit’s efforts to rebuild the city with federal protection.
This Ingham County lawsuit and others like it are claiming that the bankruptcy filing is unconstitutional under Michigan and United States law. Many city officials, such as County Circuit Judge Rosemarie Aquilina and labor union leaders, disagree with the filing and the decision to have it heard by federal courts.
Will Detroit make a comeback?
People who remember a Detroit that once thrived due to the automotive industry are dismayed at current conditions that were decades in the making.
“These residents have seen a long, slow decline in their quality of life for 40 years. Each and every day is a little worse,” said Matthew Naimi, a writer for the Detroit Free Press. “Another abandoned house, another closed business, another overgrown park. There is only one Detroit…”
With sky-high debts, the fall of the city as an industrial power, and meager pensions that have been slashed in past years, Detroit faces the daunting task of rebuilding.
Detroit is a poor city, with a majority population of African-Americans who have suffered as many residents have chosen to flee over the years.
But can a city that has been ravaged by all of the political and financial corruption really make a comeback?
Mayor Bing seems to think so. “I’m surely hoping that this will be a new start,” Bing said on ABC’s This Week.
Detroit may have reached their bleakest moment, but in time the blighted city may have a chance to be reborn.
“Bankruptcy can give Detroit the financial freedom it has never had,” said Michael Hecht, President and CEO of GNO Inc., Forbes reports. “It would also give the city the opportunity to address other issues. Strangely, this is the most hopeful time Detroit has had in decades.”