
Detroit files for Chapter 9 bankruptcy amid staggering debts  - Irishsteve
http://www.freep.com/article/20130718/NEWS01/307180107/City-Detroit-has-filed-Chapter-9-bankruptcy
======
rayiner
I think this bankruptcy is an exciting thing for Detroit. The purpose of
bankruptcy is a reboot and if anyone needs a reboot it's Detroit. Of course,
Detroit isn't the only city going through or considering bankruptcy. Unlike
most people, I view the nationwide phenomenon of municipal bankruptcies
positively. Years of unsustainable policies have left the big cities of the
U.S. in a financial state where they can no longer effectively provide
services. In 2013, 40%+ of Detroit's revenues went to bond payments, pension
benefits, and health benefits to retirees. This is money taken away from
providing services to current residents of the city. Bankruptcy will mean bond
money will no longer be so easily forthcoming, but that's a good thing. Cities
will be forced to grow within their means, and that pressure will force more
prudent fiscal policy going forward.

~~~
Shivetya
It will be interesting to see how pension liabilities and current pension
guarantees are handled. This is a very large scale problem not just in Detroit
but across America, where the retirement guarantees given to retiring
politicians and government workers is very costly.

If they force the bond holders to eat it all then the market for municipal
bonds will be hurt badly. The irresponsible largess in the current government
pension system needs to come to an end.

~~~
fnordfnordfnord
>It will be interesting to see how pension liabilities and current pension
guarantees are handled.

Pensioners will be last in line as usual, I assume.

>If they force the bond holders to eat it all then the market for municipal
bonds will be hurt badly.

Good.

> The irresponsible largess in the current government pension system needs to
> come to an end.

1\. It's always the working stiffs who have to sacrifice, isn't it?

2\. It has come to an end.

~~~
anonymoushn
Is it really a sacrifice if you promise yourself something impossible and then
fail to make good on it?

~~~
fnordfnordfnord
It's not as though they let the garbage man write his own pension.

It's funny, when a bank NINJA-loans a half-million dollars for a 1000ft^2
bungalow, it's always the-purchaser-took-advantage-of-the-bank, and never,
the-bank-should-have-known-better-and-deserves-to-go-broke.

~~~
tptacek
The banks are presumably going to take a huge bath on bonds they bought from
Detroit.

~~~
fnordfnordfnord
If they do, it's only because Detroit literally has nothing of value left that
can be taken.

~~~
tptacek
"If they do"? Help me understand the word "if" there?

~~~
fnordfnordfnord
If, as in if the Federal Gov't doesn't bail them out.

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jpdoctor
What I don't see in the comments yet: This is interesting not only for
Detroit, but for the precedent it sets. There are 10 or 15 municipalities that
will study how to screw the retirees & bondholders as thoroughly as Detroit
plans to and then go down that path.

~~~
e40
I'm very liberal, but I don't see this as _screwing_ the retirees. I think
they got a better than they should have deal. The unions over-reached and they
got rates of return that were unsustainable. We haven't even talked about the
gaming of the system that happens (punching up salary for the last year, so
their retirement benefit goes up).

The police chief in a town near mine retired on something like $300-400K and
it was discovered that he had taken a job at another city, several hundred
miles away.

There is so much corruption and abuse of the municipal retirement plans that I
think a reboot is in order.

~~~
rdouble
In California the police can pre-retire and collect their retirement while
they are still working at their same job. So you have the San Luis Obispo
sheriff making upwards of $600,000.

If you're ever living in San Francisco making $130K as a programmer yet still
wondering if you've made the right career choice, browse the public salary
databases in the area to confirm the fact that you indeed did not.

~~~
rayiner
If you make $130k in California as a programmer, plus maybe $10k in employer
health insurance contribution and another $10k in 401k matching ($150k total
comp), you're in the same overall pay bracket as a "sewers supervisor" in San
Rafael or a BART train operator: [http://www.mercurynews.com/salaries/bay-
area?appSession=8741...](http://www.mercurynews.com/salaries/bay-
area?appSession=87417187696116&RecordID=&PageID=2&PrevPageID=2&CPIpage=1000&cbJumpTo=1100).

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denzil_correa
Apparently, one of the major reasons for bankruptcy has been population loss.
Detroit has lost 250,000 people in the last decade. What has particularly
happened in Detroit that has led to migration of population?

~~~
rayiner
Detroit's de-population is a tremendously sad story. The city peaked in the
heyday of the U.S. auto industry at 1.8 million people, and is now around
700,000. The decline of the U.S. auto industry meant jobs left the city, and
along with those jobs most of the middle class people. This was compounded by
white flight in the 1960's and 1970's (and as a result the city proper is 80%
black even though the overall Detroit metro area is 70% white). Fully a third
of households in the city are below the poverty line.

~~~
djKianoosh
Did the bailout help?

~~~
rayiner
It probably stopped the city from collapsing entirely into the dust, which
would have been sad.

Detroit was a symbol of what was great about America in the 1950's and 1960's.
In 1960, it had the highest per-capita income in the U.S. It was built on
American technology and American manufacturing prowess and an industry that
brought wealth and good jobs to ordinary Americans, not just the top 1%
(either financially or intellectually).

~~~
pravda
Oh no. No no no.

It was built on the auto cartel, which robbed consumers all across the country
to keep the Grosse Point estates of the automobile executives well appointed
and manicured.

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georgemcbay
Looks like it might be time for OCP to demolish Old Detroit and replace it
with Delta City.

~~~
negativity
I'D BUY _THAT_ FOR A DOLLAR!

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aculver
Does anyone have any insight into how this affects residents of the suburbs
like Livonia, Farmington Hills, Dearborn, Ann Arbor, Royal Oak, etc.? I've
been visiting "Detroit" since I was a kid, but in reality was always staying
with people outside Detroit proper.

~~~
zaius
Pretty sure they're all separately incorporated, so it wouldn't affect them
directly. It will affect retires who moved out of Detroit into these cities
and now rely on Detroit pensions.

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outworlder
Related to the other thread about San Francisco housing prices, in Detroit
they should have hit rock bottom. Which would be good for cash-strapped
startups trying to increase their runway.

I know nothing about crime rates, transportation and other amenities which
could make life difficult. Is it that bad?

~~~
burkemw3
The cheap parts of Detroit are that bad. After a screening of BURN, an film
following firefighters in Detroit, a firefighter commented 'A gallon of gas is
much cheaper than a movie ticket.' There are blocks of houses where 0, 1, or 2
houses are occupied.

Downtown Detroit is safer and has better services, but it costs more than the
rock bottom prices.

There are people targeting start ups for Detroit though:
[http://detroitventurepartners.com/](http://detroitventurepartners.com/)

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jstalin
I'm surprised it took this long. The whole situation has been extremely
political and this should have been done long ago.

Perhaps now Detroit (the city itself) will physically shrink to accommodate
its ability to actually service residents.

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djKianoosh
Same site had an article about this in December 2011:
[http://www.freep.com/article/20111222/NEWS01/112220519/Detro...](http://www.freep.com/article/20111222/NEWS01/112220519/Detroit-
s-debt-crisis-even-worse-than-thought-state-s-review-reveals)

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znowi
Reminds me of this little clip :)
[http://www.youtube.com/watch?v=oZzgAjjuqZM](http://www.youtube.com/watch?v=oZzgAjjuqZM)

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eeky
The deindustrialization and depopulation really hurt Detroit. But what also
strikes me is the rapid change in racial demographics. In 1940, Detroit had a
90% white population and was the highest standard of living city in America.
During the course of WWII, 350,000 blacks moved into Detroit. In 1943, the
Detroit Race Riot caused by tensions between whites and blacks resulted in 43
dead, 433 wounded. In 1967 it happened again, this time 43 dead, 1189 injured,
over 7,200 arrests, and more than 2,000 buildings destroyed. President Lyndon
B. Johnson sent in the Army to quell it. In 2010, the demographics are 10%
white and 82% black, and Detroit is a bankrupt wasteland.

Deindustrialization happened in other cities such as Pittsburgh - but they've
recovered by transitioning into technology/medicine industries and the like.
Pittsburgh has not seen a demographic shift like Detroit.

[http://en.wikipedia.org/wiki/Demographic_history_of_Detroit](http://en.wikipedia.org/wiki/Demographic_history_of_Detroit)

[http://en.wikipedia.org/wiki/Detroit_Race_Riot_%281943%29](http://en.wikipedia.org/wiki/Detroit_Race_Riot_%281943%29)

[http://en.wikipedia.org/wiki/1967_Detroit_riot](http://en.wikipedia.org/wiki/1967_Detroit_riot)

~~~
ryusage
There's a 43 year gap between those stats. You've got the beginnings of a
hypothesis, but I think you need a lot more data if you want to support it at
all.

~~~
kingkawn
What is the hypothesis; black people killed Detroit?

~~~
mikestew
Or it could be that an 82% black population indicates $SOMETHING, rather than
"black people killed Detroit". When Gary, IN started to fall apart with the
steel mills closing, my theory was that the only people left were the ones too
poor to get out. Could be the same with Detroit. Or not, I don't know. But the
demographics remain, and a drive down Woodward Avenue will confirm the
numbers.

~~~
kingkawn
What does it mean though? Your hypothesis should be something more than there
sure are a lot of black people there and then let people's imaginations fill
in what that means based on biases and broad generalizations. An observation
is not a hypothesis.

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inzax
You should expect to see this more often than not. Cities in Florida are going
through the same things, but just haven't defaulted yet. Expect it. Its going
to be the norm.

most of this is due to the archaic pension system.

