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Detroit Files Nation's Largest-Ever Municipal Bankruptcy


Detroit has filed for bankruptcy. It was once one of the country's biggest cities and the wealthy hub of the auto industry. But after decades of population loss, tax revenues have dried up and public services are in decay. As Quinn Klinefelter reports from member station WDET, yesterday's filing poses an uncertain future for Detroit's citizens and creditors.

QUINN KLINEFELTER, BYLINE: In his suite at City Hall, Detroit Mayor Dave Bing, wearing a look of resignation, tried to put the best face on a situation he's battled for more than four years. Detroit, bleeding cash and nearly unable to pay its bills, is going bankrupt.

MAYOR DAVE BING: I really didn't want to go in this direction. But now that we are here, we have to make the best of it. This is very difficult for all of us, but if it's going to make the citizens better off, then this is a new start for us.

KLINEFELTER: Bing really had no choice. Detroit faces a budget deficit of nearly $400 million and roughly $18 billion in long-term debt. Michigan's governor declared the city in a fiscal emergency and appointed bankruptcy attorney Kevin Orr as an emergency manager over the city's finances. Orr says Detroit is at the point of no return.

KEVIN ORR: Detroit is simply not on sustainable footing, continuing to borrow, continuing to defer pension payments, continuing not to pay its bills on time, continuing a deepening insolvency - $18 billion. We simply can't continue along this line, because we cannot continue to carry this level of crushing debt.

KLINEFELTER: The bankruptcy filing itself became a race to the courthouse. Unions representing city workers were trying to file lawsuits blocking the governor from approving the bankruptcy requested by Orr. Many of the city's roughly 100,000 creditors are also unhappy. The stakes are especially high for retired city workers. Analyst Mike LaFaive with the Mackinac Policy Center says bankruptcy means retirees will likely lose health care coverage and a substantial portion of their pensions.

MIKE LAFAIVE: Imagine a retiree from the city of Detroit who had thought he had retired on a very comfortable pension - because Detroit's pensions were generous - and is now looking at receiving something like 10 cents for every dollar that he was receiving.

KLINEFELTER: But bankruptcy is not really catching any Detroiters by surprise. Most are well aware the city teeters on the edge of financial collapse. Some, like Calvin Goodwin, call it one more sign of a city in decay, where it can take hours for police, firefighters or a city bus to arrive.

KELVIN GOODWIN: I think it's terrible that we had to file for bankruptcy. For we being the Motor City, we can't even get a decent bus system or whatever to run on time.

KLINEFELTER: Emergency manager Orr vows to reinvest in public safety as part of Detroit's restructuring. But a judge still has to approve Detroit's effort to declare bankruptcy and the court could, in essence, force the city to cut back even more on services and perhaps even put items like priceless museum art pieces, even the original Howdy Doody puppet, on the auction block. For NPR News, I'm Quinn Klinefelter in Detroit. Transcript provided by NPR, Copyright NPR.

Quinn Klinefelter