On December 3, 2013, a U.S. Bankruptcy Judge ruled that the city of Detroit can file for Chapter 9 bankruptcy, making it the largest municipal bankruptcy in American history. The reason cited was explained by Judge Rhodes, "The city no longer has the resources to provide its citizens with basic police, fire and emergency services," Judge Rhodes declared the city as insolvent.
What does Chapter 9 mean?
The term "insolvent" means that the city is unable to pay its debts, which totals $18 billion. Chapter 9 is the chapter of the Bankruptcy Code that allows cities to reorganize. Chapter 9 pertains to cities and towns, villages, counties, taxing districts, municipal utilities, and school districts. It allows these municipalities to regroup and lay out a plan to recover and get back on their feet.
What led to Detroit's downfall?
Detroit was once the nation's fourth largest city. Since the 1950's, Detroit was the hub for auto manufacturing plants, offering blue-collar jobs that paid well. The city's population grew to 1.8 million. But the population has now declined to 684,799 in 2012. The fall of Detroit has been blamed on the auto industry collapse, segregation and politics. Foreign competition caused many factory jobs to dry up, causing people to flee the city to search for a better life.
- Property values have declined by 77 percent over the past 50 years.
- Detroit has the highest violent crime rate in 2012 of any other U.S. city with over 200,000 residents. Their crime rate is five times the national average.
- The city owes pension funds $3.5 billion, and health care costs of $5.7 billion.
- Detroit has 78,000 structures that are abandoned.
- The city can't afford new police cars, ambulances or street lights.
The future of Detroit remains to be seen. Many are hopeful that the city's new mayor will possess the skills to help turn the city's dire condition around. One fact is certain: it will take a team of dedicated leaders to make it happen.