Detroit files for bankruptcy

Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.

DETROIT — Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.

Kevyn Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing Thursday in federal bankruptcy court.

A number of factors — most notably steep population and tax base falls — have been blamed on Detroit’s tumble toward insolvency. Detroit lost a quarter-million residents between 2000 and 2010.

A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.

In recent months, the city has relied on state-backed bond money to meet payroll for its approximately 10,000 employees.

Orr was unable to convince a host of creditors, the city’s union and pension boards to take pennies on the dollar to help facilitate the city’s massive financial restructuring.

If the bankruptcy filing is approved, city assets could be liquidated to satisfy demands for payment.

“Only one feasible path offers a way out,” Gov. Rick Snyder said in a letter to Orr and state Treasurer Andy Dillon approving the bankruptcy.

Snyder determined earlier this year that Detroit was in a financial emergency and without a plan to improve things.

He made it the largest U.S. city to fall under state oversight when a state loan board hired Orr in March.

His letter was attached to Orr’s bankruptcy filing.

“The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,” Snyder wrote.

“The city’s creditors, as well as its many dedicated public servants, deserve to know what promises the city can and will keep. The only way to do those things is to radically restructure the city and allow it to reinvent itself without the burden of impossible obligations.”

A turnaround specialist, Orr represented automaker Chrysler LLC during its successful restructuring. He issued a warning early on in his 18-month tenure in Detroit that bankruptcy was a road Detroit and its creditors did not want to tread.

He laid out his plans in June meetings with debt holders, in which his team warned there was a 50-50 chance of a bankruptcy filing.

Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than the 10 cents on the dollar under that plan.

Orr’s team of financial experts put together said that proposal was Detroit’s one shot to permanently fix its fiscal problems.

The team said Detroit was defaulting on about $2.5 billion in unsecured debt to “conserve cash” for police, fire and other services.

“Despite Mr. Orr’s best efforts, he has been unable to reach a restructuring plan with the city’s creditors,” the governor wrote. “I therefore agree that the only feasible path to a stable and solid Detroit is to file for bankruptcy protection.”

Detroit’s budget deficit is believed to be more than $380 million. Orr has said long-term debt was more than $14 billion and could be between $17 billion and $20 billion.

Just Posted

Ella Stoner, five, is ready to cut off her hair and donate it to A Child’s Voice Foundation. (Photo by Lauren Stoner Photography)
Central Alberta girl to donate her ‘princess hair’ to A Child’s Voice Foundation

A five-year-old girl from Rimbey has never had a haircut before. Now,… Continue reading

Asymptomatic testing will now be available for "priority groups" who are most likely to spread the COVID-19 virus to vulnerable or at-risk populations. File photo by THE CANADIAN PRESS
Alberta adds 1,195 new COVID-19 cases Saturday

Red Deer has dropped to 760 active cases

Lacombe-Ponoka MLA Ron Orr
Central Alberta MLAs comment on UCP members kicked out of caucus

A pair of central Alberta MLAs have commented on the two United… Continue reading

Contributed photo
Johanna Hannaford: Central Alberta designer offers inclusive clothing

By Stephanie Rhodes Local designer Johanna Hannaford’s inclusive clothing creations are smashing… Continue reading

Red life-ring with splash
Started from the bottom: How a family business started and grew in central Alberta

By Carina Moran We started our business in the basement of our… Continue reading

Red Deer Mayor Tara Veer and several members of city council helped kick off the spring Green Deer cleanup campaign on Wednesday. Veer said city workers do their best to keep the city looking good, but need volunteer help to get rid of litter that has blown into bushes onto road sides over the winter. (Photo by LANA MICHELIN/Advocate staff)
Red Deer city councillors launch spring Green Deer campaign

Volunteers are needed to keep the city looking good

Vancouver Canucks' Zack MacEwen (71), Travis Boyd (72) and Jimmy Vesey (24) celebrate a goal against the Edmonton Oilers during third period NHL action in Edmonton on Saturday, May 15, 2021.THE CANADIAN PRESS/Jason Franson
Big third period lifts Vancouver Canucks to 4-1 victory over Edmonton Oilers

Canucks 4 Oilers 1 EDMONTON — Matthew Highmore scored twice in the… Continue reading

A vial of the Medicago vaccine sits on a surface. CARe Clinic, located in Red Deer, has been selected to participate in the third phase of vaccine study. (Photo courtesy www.medicago.com)
Canada’s vaccine rollout operation won’t miss a beat with new military leader: expert

DARTMOUTH — The sudden departure of the senior military officer in charge… Continue reading

Quebec Premier Francois Legault speaks during a news conference on the COVID-19 pandemic, Tuesday, September 29, 2020 at the legislature in Quebec City. THE CANADIAN PRESS/Jacques Boissinot
Quebec premier argues province has power to amend constitution in letter to Trudeau

MONTREAL — Quebec Premier François Legault has written a letter to Prime… Continue reading

A demonstrator stands in front of riot police officers during a banned protest in support of Palestinians in the Gaza Strip, in Paris, Saturday, May, 15, 2021. Marches in support of Palestinians in the Gaza Strip were being held Saturday in a dozen French cities, but the focus was on Paris where riot police countered organizers who said they would defy a ban on the protest, ordered on the grounds that it risked turning violent. (AP Photo/Rafael Yaghobzadeh)
Police fire tear gas on banned Palestinian march in Paris

PARIS (AP) — French riot police fired tear gas and used water… Continue reading

Photo by The Associated Press
NYC Pride parade bans police; Gay officers ‘disheartened’

NEW YORK (AP) — Organizers of New York City’s Pride events said… Continue reading

Welcoming cowboy boots at the historic and colourful Last Chance Saloon in the ghost town of Wayne near Drumheller, Alta., on Thursday, Sept. 19, 2019. The bar and hotel are up for sale. THE CANADIAN PRESS/Jeff McIntosh
‘It was a going concern’: Remaining bar and hotel in Alberta coal ghost town for sale

WAYNE, Alta. — Built during the First World War, it survived the… Continue reading

A letter from a bottle that washed up in New Brunswick in 2017 is shown in an undated handout photo. A team of researchers from Université du Québec à Rimouski are trying to solve the mystery of whether a letter in a bottle that washed up in New Brunswick in 2017 was indeed from a young victim of Titanic shipwreck or simply a hoax. THE CANADIAN PRESS/HO, N. Beaudry, UQAR *MANDATORY CREDIT*
Real or hoax? Quebec scholars probe mystery letter allegedly from Titanic passenger

MONTREAL — Researchers from Université du Québec à Rimouski are trying to… Continue reading

Minister of Transport Marc Garneau takes part in a press conference on Parliament Hill in Ottawa on Tuesday, Nov. 26, 2019. Advocates, experts and opposition MPs say correspondence showing close communication between the federal Transport Department and the Canadian Transportation Agency regarding passenger refunds throws into question the independence of the CTA, an arm’s-length body. THE CANADIAN PRESS/Sean Kilpatrick
Emails reveal close communication between government, transport regulator on refunds

OTTAWA — Advocates, experts and opposition MPs say correspondence showing close communication… Continue reading

Most Read