The largest city in American history to file for bankruptcy protectionis officially bankrupt.
U.S. Bankruptcy Judge Steven Rhodes ruled Tuesday that Detroit is eligible for Chapter 9 bankruptcy protection, allowing city officials to negotiate in court with bondholders, pension funds, unions and other stakeholders. Many say that bankruptcy is the only way the city can attempt to settle its debts, which have been estimated as high as $18 billion.
"The city cannot legally increase its tax revenues nor can it further reduce its expenses without further endangering health and safety," Rhodes said as he announced the ruling. Rhodes added that retiree pensions are also on the table for cuts, despite passionate arguments delivered by pension and union representatives in court. [...]
A report released in November by the liberal think tank Demos eviscerated the city's leaders for poor financial decisions and suggested that Detroit's long term debt was being exaggerated. The pension funds have also disputed Orr's numbers; they say the two pension funds (one servicing workers, and one for police and firefighters) are only $644 million underfunded, rather than Orr's claim of $3.5 billion.
“To say the pension fund killed the city, it’s like if you were stabbed, strangled and blown up, did you die from the strangling?” Senior Fellow Wallace Turbeville said during a media call Nov. 20.
David Allen is a 50-year old retired Detroit firefighter who lost the use of his legs during a spinal injury sustained on the job in Detroit. He was quoted in a statement objecting to any possible cut of his pension.
“I worked hard for Detroit for 20 years, played by the rules, and already made significant sacrifices – taking pay cut after pay cut,” he said. "In return for risking my life to serve my community, the city promised to take care of my family – but instead the city is retiring us into poverty."
Read the full report: The Detroit Bankruptcy