Bhanumathi RamakrishnaPosted: 07/20/2013 05:30 AM IST | Updated: 06/10/2014 03:04 PM IST
America's largest automotive hub — Detroit — filed for bankruptcy on Thursday. This is the largest municipal bankruptcy in U.S. history ever.
One of the most-populous cities in the U.S once, Detroit registered a steady decline in its population, blame it on the rising crime record and downturn of basic services that left the city coffers high and dry.
To plug its losses, the city loaned enormous sums over the years. As Detroit further wallowed to an astronomical debt of $19 billion, Michigan delegated an emergency manager to redraft contracts and sell off some of the city’s assets to stabilize the city's economy. Despite of his efforts, Kevyn Orr, a former D.C. bankruptcy lawyer, failed to forge a deal with creditors.
He compelled public employees to give up on their retirement benefits and municipal investors, who had lent money to Detroit, were asked to take pennies for dollars. When none of the groups concurred, Detroit filed for bankruptcy.
The downfall of Detroit began way back in 1967 with the race rumpus, one of the most violent turbulence recorded in the country's history, that has only accelerated over the years.
Once famous as the “Motor City”, Detroit once boasted of having highest per capita incomes in the country. Today, Detroit registers as the city with highest number of crimes in America. Nearly 80,000 buildings stand deserted or wrecked. Almost half of the city streetlights do not work. The jobless rate is above 18 per cent.
Given its bleak condition, more than a quarter-million residents have fled the city between 2000-2012. With the decline in the fortune of the city's auto industry, even the inflow of tax revenue and state aid has stopped.
“In a letter authorizing the bankruptcy filing, Gov. Rick Snyder (R) said the consequences of laboring under extreme debt would be even worse than bankruptcy.”
“I know many will see this as a low point in the city’s history. If so, I think it will also be the foundation of the city’s future — a statement I cannot make in confidence absent giving the city a chance for a fresh start, without burdens of debt it cannot hope to fully pay,” he wrote.
AW: Suchorita Dutta
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