Governor authorizes Detroit bankruptcy filing, describes it as only viable option to help residents and restore city; Tough step will revive city buried in $18 billion debt and unfunded liabilities
Thursday, July 18, 2013
DETROIT – Gov. Rick Snyder today authorized Detroit’s emergency manager to seek federal bankruptcy protection for the city, saying it was the only viable option to provide the 700,000 people of Detroit with the public services they need and to restore the city.
“The fiscal realities confronting Detroit have been ignored for too long. I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future,” the governor said. “This is a difficult step, but the only viable option to address a problem that has been six decades in the making.”
Snyder’s decision allowed Detroit Emergency Manager Kevyn Orr to make a filing under Chapter 9 of the federal bankruptcy law. Orr filed for Chapter 9 protection today shortly after receiving authorization from the governor. Chapter 9 protects financially distressed municipalities from creditors while their debts are resolved under the direction of a bankruptcy judge.
Detroit has more than $18 billion in debt and unfunded liabilities and doesn’t have the revenues to meet those obligations and provide an adequate level of services to its people, who pay the highest taxes per capita in Michigan. The city’s debt level is unsustainable. Currently, 38 cents of every city dollar goes toward debt repayment, legacy costs and other obligations. By 2017 that figure is expected to reach 65 cents per dollar.
“The simple fact is Detroit is in a financial crisis. The city is insolvent and has been borrowing money to pay its bills for nearly a decade. Bankruptcy is the only feasible option to fix the city’s finances and do what is right for the 700,000 people of Detroit,” Snyder said.
The governor noted Orr’s restructuring plan for the city calls for investing $1.25 billion over 10 years in core services, primarily police and fire protection, trash pickup and street lighting.
“Fixing the city’s finances will allow for investments in key areas that will improve the quality of life for Detroiters and encourage growth and investment in the city,” Snyder said.
“We want to create an environment that attracts more families, young professionals and job providers to Detroit. That will be a win for Detroit and a win for Michigan. Michigan is the comeback state and we need our state’s largest city to be healthy and strong to keep the comeback going strong.”
The governor and Orr will hold a news conference at 10 a.m. Friday to discuss the Chapter 9 bankruptcy filing for Detroit. The news conference will take place at the DPTV studios, which are located at 5057 Woodward Ave., Detroit 48202. The news conference also will be live streamed and may be accessed by going to: www.michigan.gov/snyder.