Detroit became the most populous U.S. city to file for bankruptcy, seeking court protection from creditors while it tries to eliminate a budget deficit and cut long-term debt.
“I authorize this necessary step as a last resort to return this great city to financial and civic health for its residents and taxpayers,” Michigan Governor Rick Snyder, a Republican, said in a letter today authorizing Kevyn Orr, the city’s emergency manager, to file the petition.
Michigan’s largest city has seen its population decline to 707,000, down 7 percent since 2010, according to U.S. Census data. Median household income was less than $28,000, compared with $49,000 statewide, and more than 36 percent of residents lived in poverty as of 2011, Census data show. The median home value of $71,000 was barely half the $137,000 value statewide.
The city listed assets and debt of more than $1 billion in a Chapter 9 petition filed today in court in Detroit. Chapter 9 of the U.S. Bankruptcy Code is reserved for municipalities and differs from the rules used by bankrupt companies in Chapter 11.
Orr warned in May that the city might run out of cash. His proposal to restructure more than $17 billion in debt and long-term obligations includes cutting pension payments for public employees, ending cost-of-living increases, removing some workers from the system and making the rest pay more.