Detroit Residents Object to Bankruptcy


Flickr CC via theamericanroadside
The city of Detroit filed for bankruptcy earlier this year, and last week Detroit residents and several city officials testified in bankruptcy court to object to the filing.  Many of the residents were city employees afraid of losing their pension.  After working twenty to thirty years as a municipal worker, many citizens are left feeling they will be desolate without the money they were promised.

Detroit has $18 billion in debt.  About half of the debt comes from providing benefits for retired workers.  Detroit has suffered from losses in revenues since 1960.  Housing prices have significantly dropped and city officials have failed to make proper adjustments to financial policy.  In 2012, Detroit has over 21,000 people receiving a pension and only 10,000 employees.  Currently the money spent on retirement benefits for Police and Fire department workers is greater than the current operating budget.

A bankruptcy would cause pensions to be reduced, but not eliminated.  Michigan state law protects pensions for government employees, so the filing was challenged as a violation of the state constitution.  The judge in bankruptcy court, however, ruled the filing to be legal in July.

Flickr CC
The attorney for Detroit is hoping to submit a financial restructuring plan early next year.  Hearings this month will determine whether or not the city is eligible to move forward.

Bankruptcy will not solve Detroit’s struggles.  Most likely the population decline will continue after benefits are cut.  While the auto industry, the heart of Detroit’s economy, is financially healthy again, the lack of economic diversity and decline in property value will keep the city underfunded.

Post a Comment

Previous Post Next Post