Friday, July 19, 2013

19/7/2013: Detroit officially files for Chapter 9

So after much of prevarication and discussions with the unions (there always discussions with the unions involved), the City of Detroit has filed for Chapter 9 federal bankruptcy protection. Detroit recently missed USD40 million payment to its own pension system and has amassed estimated USD18.5-20 billion in long-term liabilities.

Washington Post has an excellent timeline on the crisis: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/07/18/detroit-just-filed-for-bankruptcy-heres-how-it-got-there/

The city has shrunk over the decades from over 1.8 million in 1950 Census to around 700,000 currently (2010 Census put Detroit population at 713,777). In 2000-2010 the city population fell by 25% with the city rankings in the US by population falling from 10th largest to 18th largest. Meanwhile the six-counties Metropolitan Detroit area population is healthy at 4.296 million and ranks 13th largest in the US.

Quote from the Washington Post: "The official unemployment is now 18.6 percent, and fewer than half of the city’s residents over the age of 16 are working. Per capita income is an extremely low $15,261 a year…"

And another quote: "“The city’s operations have become dysfunctional and wasteful after years of budgetary restrictions, mismanagement, crippling operational practices and, in some cases, indifference or corruption,” Orr wrote in May. “Outdated policies, work practices, procedures and systems must be improved consistent with best practices of 21st-century government.” (Detroit has been a one-party city run by Democrats since 1962.)"

A good compendium of information on Chapter 9 bankruptcy for the cities from the Business Inside here: http://www.businessinsider.com/municipal-bankruptcies-explained-2013-7

Apocalyptic imagery of the city: http://www.marchandmeffre.com/detroit/

And my earlier post on the lessons Detroit bankruptcy process offers in comparatives to Ireland's errors in relation to the banks crisis:
http://trueeconomics.blogspot.ie/2013/06/662013-detroit-is-about-to-go-bankrupt.html
As usual, this blog was ahead of the Irish news curve by a month...

Lastly, a ray of hope: http://www.businessinsider.com/after-filing-bankruptcy-detroit-is-on-the-verge-of-an-epic-comeback-2013-7

Which echoes some of my tweets on the subject (read from the bottom tweet up):


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