It looks like former Republican presidential nominee Mitt Romney got what he asked for. Earlier today, Detroit filed for Chapter 9 bankruptcy, the largest case of its kind in United States history. Today’s filing is the result from decades of people leaving the city combined with a shrinking tax base and countless financial issues. A 16 page report was filed with the U.S. Bankruptcy Court in Detroit.
Originally, Gov. Rick Snyder’s office had plans to announce the filing on Friday morning at the same place where a financial emergency was declared back on March 1. By state law, Snyder is required to approve the filing, but when asked by The Detroit News, Snyder said he is yet to see any type of bankruptcy request cross his desk. However, sources close to Snyder told The Detroit News that Snyder is expected to go over these documents “for a couple of days” before coming to a decision.
If the Chapter 9 filing is approved, it could take years for Detroit’s restructuring to get started. Detroit owes Bank of America and UBS AG around $340 million, and all parties involved have already agreed to pay back 75 cents for every dollar owed. The bankruptcy plan is believed to mirror a restructuring proposal originally unveiled back on June 14. However, this plan drew the ire from some creditors who believed that the cut backs were too much and didn’t include things like the sale of city assets. This includes Belle Isle and the Detroit Institute of Arts, which is believed to have billions of dollars of art in its collection. Those with pension funds are also expected to take a hit as many would only receive 10 cents on the dollar.
On top of all that, the bankruptcy filing is expected to be long and drawn out, setting up a battle between creditors and the city never seen before. The unsecured creditors are expected to take the biggest hit, with a $2 billion payout expected to be asked for on around $11.5 billion in debt. The plan, as it currently stands, would call for $1.25 billion to instead be allocated for the replacement of emergency vehicles, street lights, and the deconstruction of dilapidated homes over the course of the next decade. Ideally, city officials hope to stabilize Detroit, bring in new residents, and lower property taxes.
Once upon a time, Detroit was the fourth largest city in the United States with 2 million residents, and was known for its industry. Almost 50 years later, Detroit is known for citizens who leave at a record pace, a high unemployment rate, dried up state funding, and a whole lot of corruption. Today’s filing hits close to home with the Big Three who call Detroit home. Unlike General Motors and Chrysler’s bankruptcy filing back in 2009, President Obama’s administration isn’t extending a life line to Detroit this time around. Sources close to The Detroit News say that Gov. Snyder is expected to go into more detail on various talk shows on Sunday morning.
Obviously, this situation is a fluid one and is expected to take a while, so stay tuned.
Source: The Detroit News