A historic step with a national impact occurred Thursday afternoon.
Kevyn Orr, Detroit's emergency manager, filed a 16-page Chapter 9 municipal insolvency petition in U.S. Bankruptcy Court, the Free Press and Detroit News report. By seeking federal protection from creditors, Detroit became the largest U.S. city in history to declare municipal bankruptcy.
His action lays "the groundwork for a historic effort to bail out a city that is sinking under billions of dollars in debt and decades of mismanagement, population flight and loss of tax revenue," the Free Press article says.
Gov. Rick Snyder, who appointed the prominent bankruptcy attorney in March to manage Detroit finances, explains in a statement why he signed off on the pivotal step that blazes a new patch for major cities in financial distress.
"The fiscal realities confronting Detroit have been ignored for too long. I'm making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future. This is a difficult step, but the only viable option to address a problem that has been six decades in the making."
The governor plans a 10 a.m. Friday news conference at the Maccabees Building in Midtown.
Free Press: The filing begins a 30- to 90-day period that will determine whether the city is eligible for Chapter 9 protection and define how many claimants might compete for the limited settlement resources that Detroit has to offer. The bankruptcy petition would seek protection from creditors and unions who are renegotiating $18.5 billion in debt and other liabilities. . . .
Orr . . . has warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.
Kevyn Orr reportedly will take a huge step.
Protection includes an automatic stay against city treasury-related lawsuits.
Free Press: This week, the city’s two pension funds, which have claims to $9.2 billion in unfunded pension and retiree health care liabilities, filed suit in state court to prevent Orr from slashing retiree benefits
The Free Press article by three journalists -- Nancy Kaffer, Stephen Henderson and Matt Helms -- uses sweeping language to describe the turning point:
Because of the stakes involved, and the impact on residents statewide, as well as 30,000 current and retired city workers and Detroit’s ability to stay in business, the case could be precedent-setting in the federal judiciary. It could also set an important trajectory for the way troubled cities nationwide settle their financial difficulties.
Detroit News report Robert Snell tweets about what he sees as an irony: "Bankrupt #Detroit just paid $1,213 to file Chapter 9 bankruptcy."
Another footnote: The 16-page petition was filed online with the court, according to WXYZ reporter Stephen Clark.
Snyder and Orr discussed the situation Monday. Additional meetings with creditors, legal teams and the Snyder administration were scheduled in recent days.
Last month, Orr met with creditors to offer them collectively a $2 billion note in exchange for writing off more than $11 billion in outstanding debt as an alternative settlement to bankruptcy. That deal, according to Orr, works out to a payment of roughly ten cents on the dollar based on the anticipated payout of the city's long-term debts.
Creditors, including bond holders and the city's pension funds, appeared hesitant to take that deal-- setting the stage for today's action.
