Detroit Just Filed For Bankruptcy!

[Rageaholic]

Holy crap! This will be the largest municipal bankruptcy in America. I'm kind of speechless right now.

[Gravekeeper]

To quote a CNN commentor: "Isn't this how the movie Robocop started?"

[Andara Bledin]

I think I'm more surprised that this didn't happen sooner.

There are some fascinating image galleries of entire neighborhoods in Detroit that are practically ghost towns because everybody left when the economy moved on and nobody came in to fill the void.

[protege]

There are some fascinating image galleries of entire neighborhoods in Detroit that are practically ghost towns because everybody left when the economy moved on and nobody came in to fill the void.

Fascinating...but also sad. Sad, because of the life that was once contained in the buildings. It's pretty depressing actually, when you see it happening around you. I saw it here in Pittsburgh when the mills closed. Towns had had been home to thousands, next to mills that employed thousands...became ghost towns in the 1980s. Many of the buildings were boarded up and abandoned. During that time, they fell into disrepair, and eventually were torn down.

[mikoyan29]

This has been a long time in the making. Honestly this probably pre-dates the 1967 riots. People were leaving the city for the greener pasture of the suburbs starting in the 50's. The riots accelerated that trend. Then came the Coleman Young years with its graft and corruption. The Dennis Archer administration made some headway against that but then Kwame came in and wanted to make Young look like a Boy Scout.

This is something that should have been done a long time ago but nobody wanted to pull the trigger. And honestly, I think it is a bargaining chip because the Finance Manager has been threatening it and I don't think anyone was taking him seriously.

[gremcint]

So what actually happens when a city goes bankrupt? I have a rough idea of what happens when people and companies do but a city is something different entirely, I mean sure it owns land and employees people and has a lot of similar functions to a company but there are some key differences. For example it controls land that other people own, it handles tons of day to day events. Who takes this over? is it chopped up and given to neighbouring towns or can a corporation actually buy a city?

[Aethian]

You can buy whole city blocks for less then 50k. I found a beautiful house there once for 19k and for 15k more I could have had the whole block it was on. If I had the finances at the time I would have done it, knocked down the other buildings, and started to turn it back into nature.

[Panacea]

I think I'm more surprised that this didn't happen sooner.

Me, too. The decline of the Big Three has made it a matter of time. Even though Ford is doing better, Detroit will never be the city it once was.

So what actually happens when a city goes bankrupt? I have a rough idea of what happens when people and companies do but a city is something different entirely, I mean sure it owns land and employees people and has a lot of similar functions to a company but there are some key differences. For example it controls land that other people own, it handles tons of day to day events. Who takes this over? is it chopped up and given to neighbouring towns or can a corporation actually buy a city?

That's a good question. Mostly likely the bankruptcy court will appoint a receiver who will run the city's finances. Their city government will have to do everything through the court receiver. Since the court will take the heat for the unpopular and harsh choices that have to be made, the politicians will have cover to do what is necessary to save what is left.

Stockton CA was the most recent and largest prior to Detroit.

The court won't be able to raise taxes or remove the politicians from office. What they will be able to do is force the city and its creditors to renegotiate the city's debts and debt payments. Hold outs will have little choice but to accept a deal in order to get something. It's not a cure all, and since this is administered at the federal level, certain state mandates will still have to be followed by the city.

The city's credit will be shit, and it will have a hard time selling bonds or raising money for at least a decade. City services will become bare bones. Local political careers will probably fall as angry voters take it out on elected officials. City leaders will have to pass any new spending through the court receiver. The city may be forced to sell off valuable property at a discount to raise funds to pay its debts

In short, it will get ugly. But the city will have time to reorganize and may potentially come back . . . in about a decade.

[draco664]

A leader of the Congressional Urban Caucus has sent Obama a letter requesting immediate help.

First, there's a Congressional Urban Caucus? WTF do they do?

Second, if Obama opens up the federal wallet, expect a rush for the bankruptcy courts by other cities close to the edge.

edit: I think the guy has some serious brain damage. In the letter:

Moreover, cities like Detroit are strategically aligned, within their respective regions, to attract economic opportunities for their surrounding areas. As such, we must do all we can to protect these cities and work toward their prosperity.

I can't remember the last time someone described Detroit as "strategically aligned [...] to attract economic opportunities."

[Andara Bledin]

If Detroit really was "strategically aligned" they wouldn't have this problem they have. Other businesses would have rushed to fill in when the others started failing.

[mikoyan29]

I can't remember the last time someone described Detroit as "strategically aligned [...] to attract economic opportunities."

That's because all you ever hear is the negative aspects of Detroit. There are plenty of opportunities in Detroit but before those come to fruition, the city needs to get its financial house in order. And I think this is the first step that they need to take. This situation is honestly bigger than the Big Three. Although their position in the market doesn't help. As I said in my other post, it's complicated....

The city's credit will be shit, and it will have a hard time selling bonds or raising money for at least a decade. City services will become bare bones. Local political careers will probably fall as angry voters take it out on elected officials. City leaders will have to pass any new spending through the court receiver. The city may be forced to sell off valuable property at a discount to raise funds to pay its debts

In short, it will get ugly. But the city will have time to reorganize and may potentially come back . . . in about a decade.

City Services are already pretty bare bones. Last year, they closed down about half of their parks. There are whole chunks of the city without lighting (because the city can't pay for it and maintain it). Emergency Response Times are measured in hours (not minutes like most cities).

[mikoyan29]

Since somebody asked:
http://www.freep.com/article/2013071...cy-what-s-next

[HYHYBT]

I just heard something on the radio about a judge blocking this.

[Rageaholic]

That was weird

[Andara Bledin]

That was weird

What's weird about the USA Today home page?

Did you mean this link, instead?

So, apparently, if the bankruptcy will affect pension benefits, it's against the MI state constitution.