Detroit is the largest city to have recently filed for bankruptcy. Michigan Governor Rick Snyder says the city’s debt is not its only issue, but also the accountability of its citizens. Detroit filed for Chapter 9 bankruptcy protection facing enormous pension obligations to its union employees and other fiscal challenges.
The city’s long-term debt is estimated to be as much as $20 billion. Over the past six decades, Detroit’s population has shrunk from 1.8 million to about 700,000. The city has about 10,000 active public workers and 18,000 retired ones who are still owed pension and health benefits.
The costs of health care and pension contributions over the years have surpassed the revenue Detroit was bringing in from property and business taxes and other sources. The city has been unable to make those contributions and pay current payroll and other bills.
Kevyn Orr, the emergency manager and bankruptcy lawyer appointed by Snyder, said his goal is to ‘restructure the debt, including roughly $3.5 million in underfunded pension liabilities and to get Detroit on its feet again by fall 2014.’
Click here to read more on the city of Detroit recently filing for bankruptcy.
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