Rick Snyder, the state’s Republican governor, and Kevyn D. Orr, the emergency manager, said Detroit’s historic bankruptcy filing on Thursday gives the city “breathing room” to continue operating as it copes with its long-term debts and obligations.
“This is the time to say enough is enough in terms of the downward decline of the city of Detroit,” Mr. Snyder said at a news conference on Friday morning in downtown Detroit.
The bankruptcy filing was challenged Friday afternoon when Judge Rosemarie E. Aquilina in Ingham County, home to Michigan’s state capital, issued a declaratory judgement in lawsuits brought by the city’s pension funds. The judge ruled that the decision by Mr. Orr and Mr. Snyder to file for Chapter 9 bankruptcy violates the Michigan constitution, which protects accrued pension benefits. The state’s Attorney General immediately filed an appeal of the judge’s decision with the Michigan Court of Appeals.
Detroit is the largest American city ever file for Chapter 9 bankruptcy, and Mr. Snyder and Mr. Orr said they wanted to reassure Detroit’s 700,000 residents that police, fire and other essential services would continue to function.
“Today is business as usual in Detroit,” Mr. Snyder said. “People are still coming to work, they’re going to get paid, and regular services are still going on.”
Mr. Orr, who was appointed to by the governor, predicted that residents may even start to see improvements in city services, saying that the bankruptcy filing will allow Detroit to use its limited resources to put more police cars and ambulances in service.
“I anticipate the citizens of the city will start seeing some of these changes in the next 30 to 60 days,” Mr. Orr said.
But those representing tens of thousands of city employees and retirees said they still intended to fight the case, particularly for the thousands of retirees who depend on city pensions.
“Apparently Governor Snyder and Kevyn Orr want Detroit’s public-service workers to rely on their children for food and shelter, or have to work until they die,” said Lee Saunders, president of the American Federation of State, County and Municipal Employees.
A federal judge could be appointed as soon as Friday to begin hearing motions in what is the largest municipal bankruptcy case in American history.
The city, which is under Mr. Orr’s authority under a state statute, will be required to prove to the bankruptcy judge that Detroit insolvent and had no other option but a Chapter 9 filing.
Mr. Orr has estimated Detroit’s long-term debt at more than $18 billion. The city has also run deficits in its operating budget for several years and cannot support itself with declining tax revenues.
“We didn’t make this decision in haste,” Mr. Orr said. “This is a decision that has been winding its way through the city for the better part of six decades.”
Mr. Orr expressed confidence that the city can emerge from bankruptcy before his term as emergency manager ends in 15 months.
But there is no road map for Detroit’s recovery. Bondholders, retirees, unions and other creditors could push for the sale of city assets to recover money.
Beyond that, residents worry that city services will become worse while Detroit is in court, and that business expansion will stall out in the interim.
“For a struggling family, I can see bankruptcy, but for a big city like this, can it really work?” said Diane Robinson, an office worker in the city for 20 years.
But others, including some Detroit business leaders who have seen a surge in private development downtown, said bankruptcy seemed the only viable choice – and one that might lead to a complete overhaul of city services.
“The worst thing we can do is ignore the problem,” said Sandy K. Baruah, president of the Detroit Regional Chamber. “We’re finally executing a fix.”
Mary Williams Walsh contributed reporting from New York.
Article source: http://www.nytimes.com/2013/07/20/us/breadth-of-bankruptcy-fight-detroit-faces-becoming-clear.html?partner=rss&emc=rss
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