The city of Detroit has filed the largest-ever municipal bankruptcy in U.S. history on Thursday, setting the stage for a costly court battle with creditors, the Associated Press reported.
"Detroit simply cannot raise enough revenue to meet its current obligations, and that is a situation that is only projected to get worse absent a bankruptcy filing," Michigan's Governor Rick Snyder said as he approved a request from Detroit Emergency Manager Kevyn Orr to file for Chapter 9 bankruptcy protection.
News reports said that the one time bustling cradle of auto manufacturing and MoTown has seen its population fall to 700,000 from wht was once 1.8 million people in 1950, news reports said. Corruption cases have also been rampant. Declining investments have also been prevalent.
The city's murder rate is at its highest in nearly 40 years; only a third of its ambulances were in service in the first quarter of 2013, news reports said. Is nearly 78,000 abandoned buildings create "additional public safety problems and reduces the quality of life in the city," the governor noted in his letter.
Douglas Bernstein, a bankruptcy attorney at Plunkett Cooney in Bloomfield Hills, a suburb, said he expected the case would last one-to-three years and would be very costly.
"This could run to tens-of-millions to hundreds-of-millions of dollars," he said.
"While leaders on the ground in Michigan and the city's creditors understand that they must find a solution to Detroit's serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America's great cities," said Amy Brundage, a White House spokeswoman.
There have been few municipal bankruptcies in the U.S. and none yet the size of Detroit. Prior cases include Central Falls, Rhode Island and Vallejo, California had treated bondholders carefully, news reports said.
