“The fiscal realities confronting Detroit have been ignored for too long,” Gov. Rick Snyder said on Thursday as he authorized Detroit’s bankruptcy filing after a recommendation from Kevyn D. Orr, the emergency financial manager Mr. Snyder, a Republican, had appointed to resolve the city’s dire financial situation. “I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future.”
By Friday, many in this city, including some elected leaders, said bankruptcy seemed unfortunate but also inevitable. But those representing tens of thousands of city employees and retirees said they 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.
The move to bankruptcy by leaders in Detroit, the cradle of America’s automobile industry and once the nation’s fourth-most-populous city, also amounts to the largest municipal bankruptcy filing in American history in terms of debt.
Not everyone agrees how much Detroit owes, but Mr. Orr, the emergency manager, has said the debt is likely to be $18 billion and perhaps as much as $20 billion.
For Detroit, the filing came as a painful reminder of a city’s rise and fall.
“It’s sad, but you could see the writing on the wall,” said Terence Tyson, a city worker who learned of the bankruptcy as he left his job at Detroit’s municipal building on Thursday evening. “This has been coming for ages.”
Detroit expanded at a stunning rate in the first half of the 20th century with the arrival of the automobile industry, and then shrank away in recent decades at a similarly remarkable pace. A city of 1.8 million in 1950, it is now home to 700,000 people, as well as to tens of thousands of abandoned buildings, vacant lots and unlit streets.
From here, there is no road map for Detroit’s recovery, not least of all because municipal bankruptcies are rare. State officials said ordinary city business would carry on as before, even as city leaders take their case to a judge, first to prove that the city is so financially troubled as to be eligible for bankruptcy, and later to argue that Detroit’s creditors and representatives of city workers and municipal retirees ought to settle for less than they once expected.
Some bankruptcy experts and city leaders bemoaned the likely fallout from the filing, including the stigma. In addition to further benefit cuts for city workers and retirees, they anticipate more reductions in services for residents, and a detrimental effect on borrowing.
“For a struggling family I can see bankruptcy, but for a big city like this, can it really work?” said Diane Robinson, an office assistant who has worked for the city for 20 years. “What will happen to city retirees on fixed incomes?”
But others, including some Detroit business leaders who have seen a rise in private investment downtown despite the city’s larger struggles, said bankruptcy seemed the only choice left — and one that might finally lead to a desperately needed overhaul of city services and to a plan to pay off some reduced version of the overwhelming debts. In short, a new start.
“The worst thing we can do is ignore a problem,” said Sandy K. Baruah, president of the Detroit Regional Chamber. “We’re finally executing a fix.”
The decision to go to court signaled a breakdown after weeks of tense negotiations, in which Mr. Orr had been trying to persuade creditors to accept pennies on the dollar and unions to accept cuts in benefits.
Monica Davey reported from Detroit, and Mary Williams Walsh 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