A round-up of links to noteworthy responses to Detroit’s bankruptcy announcement and implications of pension cuts:
More Cities Should Go Bankrupt at Slate
Pension Ruling in Detroit Echoes West to California in the New York Times
A Growth Strategy for Post-Bankruptcy Detroit, published by Brookings in July 2013
Today’s court ruling confirming Detroit’s insolvency means that:
- The city may reduce its overall debt (a total of $18.5 billion)
- More time and more options in sorting out how to pay off the debt that is left
- Creditors (city unions, pension funds) can lose billions in long-term liabilities–they are expected to appeal the ruling
- The city may now move towards restoring essential services (with court supervision)
From the New York Times article:
One central argument from lawyers for the city’s public sector unions and retirees was that Detroit’s request for bankruptcy protection came before it had made good faith attempts to negotiate with creditors.
Judge Steven W. Rhodes of the United States Bankruptcy Court ruled that the size of Detroit’s debts made it “impracticable” for Mr. Orr to negotiate concessions from creditors before recommending the Chapter 9 filing to Governor Snyder.
Outside declaration of bankruptcy, the state of Michigan prohibits decreasing pension payments that public workers have already earned.
Emergency Manager Kevyn Orr says that the goal is to “emerge from court protection next year with a formal plan for starting over.”