City of Detroit declares bankruptcy
The Chapter 9 case filed in U.S. District Court for the Eastern District of Michigan came after Kevyn Orr, the emergency manager, failed to reach agreements with enough of the bondholders, pension funds and other creditors to restructure Detroit’s debt outside of court. The final decision rested with Republican Gov. Rick Snyder, who had appointed Mr. Orr as Detroit’s overseer in March.
It was expected that the city would report long-term liabilities close to $20 billion. The city’s assets were less clear, but Mr. Orr had called the city functionally insolvent and recently missed a payment to the city’s pension system of nearly $40 million.
Detroit has been in a state of decline for many years, primarily due to residents and businesses moving out of the city – migration to the suburbs. To make up for shortfalls in revenue, the city has been borrowing not only for day-to-day operational expenses, but also to meet pension and health care obligations for retirees. The latter has been an issue for many cities and municipalities nationwide, as the “Baby Boomer” generation continues to reach retirement age. As for Detroit, the city’s population has been dropping since an all-time high in 1950 of around 2 million residents. Today, the population of approximately 700,000 is after a 26% drop between the years 2000 and 2011.