Detroit filed the largest municipal bankruptcy in the nation's history Thursday afternoon, capping a long decline that left the nation's automaking capital bleeding residents and revenue, while rendering city services a mess.
The nation's fourth-largest city in the 1950s with nearly 2 million residents, the city has seen its populaton plummet to 700,000 as residents fled increasing crime and deteriorating sevices, taking their tax dollars with them.
The five-decade slide has left the city owing creditors some $19 billion and under the control of a state-appointed emergency manager. The manager has been negotiating with creditors from bond holders to pensioners to forge a plan to restructure the debt. But an agreement proved elusive as pensioners objected to benefit cuts and bond holders and insurers pressed the city to sell off assets to repay money the city borrowed to fund improvements and plug deficits.
Earlier this week, lawyers for the city's two pension funds filed suit seeking to block Michigan Gov. Rick Snyder from authorizing a bankruptcy filing. Now, the efforts to restructure Detroit's staggering debt will play out under the supervision of a federal bankruptcy judge, a process that could take years.
The city's massive debt is matched only by a devastating loss of revenue and residents — a long-term condition that has escalated in recent years.
The city's population has plummeted by 26 percent since 2000, while the unemployment rate has jumped from 7.3 percent to 18.6 percent. Property tax collections are down 20 percent and income tax collections are down by more than a third in just the past five years — despite some of the highest tax rates in the state. Even casino taxes, a bright spot in recent years, are projected to decrease because of increased competition from nearby Toledo.
All of that has led to an alarming erosion of municipal services. The city is home to nearly 80,000 abandoned and blighted structures. It recently announced plans to close 50 of its remaining 107 parks. Police response times are up to nearly an hour, and 40 percent of the city's street lights do not work. Meanwhile, Detroit has the highest violent crime rate among the nation's big cities.
"The best analogy I have heard for what is happening in Detroit is that this is a five-decade Katrina," said Peter Hammer, a law professor and director of the Damon J. Keith Center for Civil Rights at Wayne State University in the city.
"Now, you either get a voluntary agreement from people holding long-term debt, or you get bankruptcy," he added.
Orr has been searching everywhere for new revenue to help fix the problems. He has talked about spinning off the city's water and sewer department into a separate authority. He has resurrected a proposal to lease the city's beloved but deteriorating Belle Isle Park to the state. He also has reportedly explored selling some of the prized works owned by the Detroit Institute of Arts, as well as auctioning off a collection of vintage cars.
