Detroit grapples with largest-ever US municipal bankruptcy
Officials in Detroit expressed regret Friday after the city filed for bankruptcy protection, stressing that the move would ultimately help to stabilize the traditional home to the US auto industry, dpa reported.
"None of us ever wanted to get to this point," Michigan Governor Rick Snyder told a press conference, adding that Detroit's residents deserved an end to the long decline of their city and its finances.
Detroit's debt had become unmanageable and bankruptcy protection was the only way to get it back on the right track, he said.
The city filed Thursday for Chapter 9 municipal bankruptcy protection in federal court, setting in motion a 30- to 90-day period that will determine whether it is eligible for protection and define the creditors who might compete for the limited resources it has.
"We're running out of time," said Kevyn Orr, the city's emergency manager, noting there were no good alternatives to the municipal bankruptcy, the largest ever in US history.
"It gives us breathing room," he said, pointing to decades of deferred maintenance and lawsuits aimed at stopping the proceedings.
The bankruptcy petition seeks protection from creditors and unions, both of which are renegotiating about 19 billion dollars in debt and other liabilities.
Detroit, which gave birth to the top three US automakers - General Motors, Ford and Chrysler - has suffered for decades from the mismanagement of successive city administrations, population flight and loss of tax revenue.
Snyder said the decision means Detroit residents will have basic services while the process to put the city on a solid financial footing begins. Snyder, a Republican, took the unprecedented step in March of appointing Orr, a bankruptcy attorney as emergency manager of the city.
Detroit has a population of about 700,000, ranking it 18th-largest in the United States. It was once the fourth-largest city with a population of 2 million.
Orr 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.
He warned that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection and Snyder signed off on the move in a letter attached to court documents.