The troubled US city of Detroit defaulted on its debt payments Friday as a state-appointed emergency manager struggles to provide basic services to the Motor City.
“Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin,” said Kevyn Orr, a bankruptcy expert appointed by Michigan’s governor to manage the city’s troubled finances.
“Detroit’s road to recovery begins today.”
The city imposed a moratorium on some debt payments effective Friday in order to preserve the cash needed for essential services.
It said it will work with its creditors to restructure its debts in order to “return Detroit to a sustainable financial foundation and to permit much-needed reinvestment in the city.”
Orr told reporters Friday there is a “50-50″ chance that Detroit declares bankruptcy and that a decision should be made in the next 30 days.
It would be the largest municipal bankruptcy in US history.
Once the fourth largest city in the United States, Detroit has seen its population shrink by more than half from 1.8 million people in 1950 to 685,000 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 Detroit’s tax base.
With less revenue, the city had to cut back on services, prompting more people to leave.
The birthplace of the US auto industry then saw its main employers endure round after round of mass layoffs, as factories were automated or outsourced and Asian competitors siphoned away market share.
Abandoned skyscrapers, factories and homes litter the landscape. Crime is rampant. The city can’t even manage to keep all the street lights on.
“My team and I hope Detroit’s creditors and constituents recognize that compromise and shared sacrifice are required for a better, more sustainable future for Detroit and its citizens,” Orr said in a statement.
Troubled Detroit defaults on debt payments
