DETROIT, Michigan (AFP) – Detroit became the largest city in U.S. history to file for bankruptcy protection after decades of decline and mismanagement rendered the home of the nation’s auto industry insolvent.
Once a bustling beacon of industrial might, the city is now a poster child for urban decay, its landscape littered with abandoned skyscrapers, factories and homes.
Crime is rampant, and the city literally cannot afford to keep the lights on — a whopping 40 percent of streetlights are out.
Detroit’s bankruptcy is expected to make it harder for municipalities in Michigan and other U.S. states to borrow money by undermining confidence in what used to be among the most trusted bonds available.
Michigan Governor Rick Snyder said there was no other option.
“This is a difficult step, but the only viable option to address a problem that has been six decades in the making,” Snyder said in a press release.
Detroit has seen its population shrink by more than half, from 1.8 million people in 1950 to 700,000 today.
Racial tensions sparked by the civil rights movement — and the devastating 1967 riots — exacerbated white and middle-class flight to the suburbs. Businesses followed suit, further shrinking the tax base.
With less revenue, Detroit had to cut back on services, prompting even more people to leave and eventually sending the city into an economic tailspin.
The Motor City meanwhile saw its main employers go through round after round of mass layoffs as auto factories were automated or outsourced and Asian competitors siphoned away market share.
“The citizens of Detroit need and deserve a clear road out of the cycle of ever-decreasing services,” Snyder said in a letter accompanying the court filing.
“The only feasible path to a stable and solid Detroit is to file for bankruptcy protection.”
Earlier this year Snyder appointed an emergency manager with a background in bankruptcy to restructure the city’s finances.
He said he had “very much hoped” the move would help Detroit avoid bankruptcy, but that now it is time to “face the fact that the City cannot and is not paying its debts as they become due and is insolvent.”
The White House said President Barack Obama is closely monitoring the situation.
“While leaders on the ground in Michigan and the city’s creditors understand that they must find a solution to Detroit’s serious financial challenge, we remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of America’s great cities,” White House spokeswoman Amy Brundage said.Click here for reuse options!
Copyright 2013 The National Memo