City of Detroit moves to go past bankruptcy
Detroit will pay some of its creditors - at greatly reduced prices
The City of Detroit - at one time the car producing capital of America has stumbled and fallen. Poverty has gripped its windy streets and the population has largely fled to look for work elsewhere. To this end, Detroit has filed the largest municipal bankruptcy in U.S. history. Detroit won't walk away whistling from all the bad debt; according to the court, the city must address some of its creditors.
Under Detroit's bankruptcy plan, some funds must be devoted to demolishing abandoned city properties.
The city initially filed for bankruptcy protection in July of last year. When Detroit was granted protection from its creditors last December, it marked the biggest public bankruptcy in American history.
The plan has been hotly anticipated by city workers, pensioners and creditors, who have been left in the dark. This plan proposes to reduce benefits for city employees.
These cuts are reportedly not as drastic as previously feared, but will still be contested in the courts by those who face losses.
Among the city's creditors, including Wall Street banks, the plan proposes to give them only about 20 percent of the money they claim.
"We must move swiftly to emerge from bankruptcy so that the financial distress harming the city can end," state-appointed manager Kevyn Orr said in a statement.
"We maintain that the plan provides the best path forward for all parties to resolve their respective issues and for Detroit to become once again a city in which people want to invest, live and work," he added.
Part of the bankruptcy plan includes:
-- Creditors, including bond insurers, will receive an estimated 20 percent of their claims.
-- In a most welcome bit of news, police and firefighter retirees will receive at least 90 percent of their pensions - but cost of living allowances will be eliminated.
-- The Detroit Institute of Arts will keep its city-owned art collection, with assistance from foundations and private donors.
-- And $1.5 billion will be allocated over 10 years to city infrastructure and technology upgrades.
The plan is expected to hit roadblocks, including court appeals should it be approved in bankruptcy court.
Detroit has seen a dramatic decline in economic activity and population. Car production has been outsourced overseas, and the population is now estimated around 700,000 --down from the peak of 1.8 million in 1950.
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