Judge approves Detroit bankruptcy exit plan
After desperate years, former industrial powerhouse reaches ‘cusp of a new era’
DETROIT— A judge cleared Detroit to emerge from bankruptcy Friday, approving a turnaround plan that will require discipline after years of corruption, mismanagement and an exodus of residents brought this onetime industrial powerhouse to financial ruin.
“What happened in Detroit must never happen again,” Judge Steven Rhodes said in bringing the case to a close a remarkably speedy16 months after Detroit — the cradle of the auto industry — became the biggest city in U.S. history to file for bankruptcy.
The plan calls for cutting retiree pensions by 4.5 per cent, erasing $7 billion of debt and spending $1.7 billion to demolish thousands of blighted buildings, make the city safer and improve long-neglected basic services.
In signing off on the plan, Rhodes made a fervent plea to residents who expressed sorrow and disgust about the city’s woes.
The Motor City was brought down by a combination of factors, including misrule at city hall, a long decline in the auto industry and a flight to the suburbs that caused the population to plummet to 688,000 from 1.2 million in 1980.
The exodus has turned entire neighbourhoods into desolate, boarded-up landscapes. With more square kilometres than Manhattan, Boston and San Francisco combined, Detroit didn’t have enough tax revenue to cover pensions, retiree health insurance and buckets of debt sold to keep the budget afloat.
“Detroit’s inability to provide adequate municipal services runs deep and has for years. It is inhumane and intolerable, and it must be fixed,” the judge said.
Rhodes praised decisions that settled the most contentious issues in the bankruptcy case, including a deal to prevent the sell-off of world-class art at the Detroit Institute of Arts and a consensus that prevented pension cuts from getting even worse for thousands of retirees. He said the pension deal “borders on the miraculous,” though he acknowledged the cuts could still cause severe misfortune for some.
Politicians and civic leaders, including Michigan Gov. Rick Snyder, hailed Friday’s milestone. Museum leaders said it means “there are good days ahead for our city,” while De- troit Regional Chamber president and CEO Sandy K. Baruah declared Detroit to be “on the cusp of a new era and primed to reinvent itself in a way many people did not think possible.” The case concluded in lightning speed by bankruptcy standards. The success was largely due to a series of deals between Detroit and major creditors, especially retirees who agreed to accept smaller pension cheques after the judge said they had no protection under the Michigan constitution. Also, bond insurers with more than $1 billion in claims dropped their push to sell off art and settled for much less.