The economically ravaged US city of Detroit is preparing to declare bankruptcy as soon as Friday, the Detroit Free Press reported Thursday, citing unnamed sources.
It would be the largest municipal bankruptcy in history as the Motor City struggles under the weight of $18.5 billion of debt and obligations.
Michigan Governor Rick Snyder, who appointed an emergency manager to sort out the city’s finances in March, would have to sign off on the decision.
Neither his office nor the office of the emergency manager immediately responded to a request for comment.
Once the fourth largest US city, Detroit has seen its population shrink by more than half, from 1.8 million in 1950 to 685,000 today, as crime, flight to the suburbs and the hollowing out of the auto industry have eaten away at its foundations.
“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,” emergency manager Kevyn Orr said last month after imposing a moratorium on some debt payments.
Detroit’s crime rate is five times the national average, thanks in part to a “dysfunctional” police department which has been strained by cutbacks and gone through five chiefs in five years, Orr said in a report analyzing the state of the city.
Some 40 percent of street lights do not function and the city has 78,000 abandoned and blighted buildings, “nearly half of which are considered dangerous.”
Fewer than half of Detroit’s ambulances were functioning at any time during the first quarter of this year, fire department vehicles are poorly maintained and the city’s income tax systems are in a “catastrophic” state.
The city’s two pension funds — which are owed about $9.2 billion in unfunded obligations — filed suit this week to prevent Orr from slashing retirement benefits.
A key hearing on Monday that could throw a wrench into Orr’s restructuring plans would be blocked if the city files for bankruptcy on Friday, the Free Press reported.
Once the paperwork is filed, a judge must decide if the city qualifies for bankruptcy protection.
The process of determining which debts can be shed and which creditors can get a partial repayment could take years.
Bankruptcy looms for troubled US city Detroit: report
