Friday, June 14, 2013
Predominantly black Detroit will immediately stop payments on about $2 billion in debt, the city's emergency manager has announced in an effort to conserve cash
The manager, Kevyn Orr, also said that Detroit will need to cut pay and pension and health benefits for city workers. Debt holders are likely to get only pennies on the dollar. "Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin," said Orr. Orr met with the city's leading creditors behind closed doors, presenting his preliminary restructuring plan. He said that further meetings are planned with the unions representing city employees. Orr's statement and the 134-page restructuring plan did not mention the word "bankruptcy." But the risk still looms. Orr is on record saying that he wants to avoid bankruptcy but can not rule it out. It would be the largest city in U.S. history to file for bankruptcy protection. Attorney Michael Sweet, an expert in municipal bankruptcy, said that he thinks bankruptcy will be the ultimate outcome. Detroit's population has fallen 28% just since 2000. The unemployment rate, while down from 23.4% in 2010, is still at 18.6%.