Once the center of America’s once dominant auto industry, the city of Detroit has filed for bankruptcy protection. It is the largest municipal bankruptcy case in U.S. history.
The city of Detroit filed the largest municipal bankruptcy case in U.S. history Thursday, culminating a decades-long slide that transformed the nation’s iconic industrial town into a model of urban decline crippled by population loss, a dwindling tax base and financial problems.
Gov. Rick Snyder justified approving the historic filing by reciting a litany of the city’s ills, including more than $18 billion in debt, maxed-out tax rates, the highest murder rate in 40 years, 78,000 abandoned buildings and a half-century of residential flight. He said the city failed to provide basic services to residents or pay creditors.
While many might see the bankruptcy filing as the tragic end point of a drawn out decline, the battle is just beginning. The city’s creditors and public works pension funds are vowing to fight the move which will put their assets and guarantees in jeopardy.
The filing, which has broad implications for the nation’s municipal bond market and sanctity of public pension funds, was met with outrage, disappointment and a vow to fight. Some creditors adopted a war stance, threatening a prolonged battle. Others accused Emergency Manager Kevyn Orr of failing to negotiate in good faith — an essential requirement for approval of a bankruptcy petition — during his month-long push to secure concessions from creditors, including deep cuts to pensions.
“It’s war,” said George Orzech, chairman of the city’s Police and Fire pension fund.
Regardless of the ultimate outcome for the bondholders and pensioners, the bankruptcy filing is a sad commentary on neoliberal economic planning. The destruction of Detroit is a direct result of imposing a free trade regime on the country and letting GM run wild in the transgressive search for ever cheaper manufacturing locations. GM’s myopic cost cutting and short term profit seeking led to the firm’s weakness in the marketplace and ultimately to the company going bankrupt.
Now the city the company left behind has, like GM, filed for bankruptcy protection. While GM has, thanks to taxpayer subsidies, been able to enrich shareholders, the city of Detroit has a long way to go to being able to serve its residents well.