Detroit Seeks Path to Solvency

CHICAGO —  After years of population decline, a faltering auto industry and financial mismanagement by the city's government, Detroit has filed for Chapter 9 bankruptcy protection in federal court. It's the largest municipal bankruptcy in U.S. history, with the city listing more than 100,000 creditors. Detroit's financial fate now rests in the hands of a bankruptcy judge as a local judge tries to block the move.

As talks broke down with some of Detroit’s major creditors, Michigan Governor Rick Snyder told reporters the state of Michigan was out of options. “The city is basically broke,” he said.

Detroit’s bankruptcy petition, filed by state appointed Emergency Manager Kevyn Orr, lists the General Retirement System and the Police and Fire Retirement System of Detroit as two of the largest creditors, with a combined $2.5 billion in unfunded liabilities.

Orr estimates the city’s annual budget deficit at more than $300 million, with it’s long-term debt close to $20 billion. It’s money the city simply doesn't have.

“What shocked me was the tolerance of this behavior for decades. This has been going on for a very long time, and to say the least, it is at best unorthodox in terms of how these things were going,” said Orr.

The bankruptcy is another blow to Detroit. Resident Everett Cottrell said the city has struggled to shed its image of urban blight and perpetual decay.

"They [outsiders] think Detroit is a dump. No respect. It's a dump now. Big old Detroit can't even handle its own business? That's sad," said Cottrell.

Leland Harrison, another resident, blames Detroit’s fiscal mess on neglect by city leaders. He sees Emergency Manager Orr’s bankruptcy filing as a last resort.

"Well, they've had enough time to straighten it out. So I guess, as they say, 'if you can't handle it yourself, someone else will.' So I guess they did," said Harrison.

Some residents are concerned city assets could be liquidated to help pay the bills, including the large collection of paintings, sculptures and historic artifacts at the Detroit Institute of Arts. One piece is the puppet "Howdy Doody" from the iconic children’s TV show of the 1950s.

Orr tried to allay concerns. “Right now there is nothing for sale, including Howdy Doody,” he said.

But no bets are off the table. The fate of the city’s assets rests with a federal bankruptcy judge, who has yet to be appointed.