Detroit has become the biggest city in U.S. history to file for Chapter 9 bankruptcy protection.
Michigan Governor Rick Snyder authorized Detroit’s state-appointed emergency manager, Kevyn Orr, to file for bankruptcy on Thursday afternoon, which Snyder described as a painful but necessary step to rebuilding the insolvent city.
“The fiscal realities confronting Detroit have been ignored for too long,” Snyder said in a statement. ”This is a difficult step, but the only viable option to address a problem that has been six decades in the making.”
The governor’s office estimates that Detroit is now $18 billion in debt without the revenues to meet its obligations—a state of “financial crisis,” as Snyder described it on Thursday. While the 2009 auto bailout helped protect the car industry from free fall, Detroit’s fiscal health has suffered for decades as residents have continued to flee the city, eroding its tax revenue base and weakening the local economy.
Over the past few weeks, Orr, a bankruptcy attorney, tried to convince Detroit’s creditors to accept lower payments on the money they were owed. But no deal was reached, and its debts will now be worked out in bankruptcy court.
“Nothing changes from the standpoint of the average citizen’s perspective,” said Orr, according to WXYZ.
Mayor Dave Bing said, “Now that we’re here, we have to make the best of it.”
In a statement, he said, “This action will hopefully be the foundation for the fiscal turn-around of our City. Our citizens have suffered long enough and deserve better. I want to say to the people of Detroit that although we are moving into uncharted waters, Detroit has a history of fighting back during tough times. Hopefully, this is the beginning of a better path forward for our City and our people.”
A White House official said President Obama would “closely monitor” the situation as the city “works to recover and revitalize and maintain its status as one of America’s great cities.”
updated 9:00 p.m.