A federal ruling Tuesday has taken the fight over fixing Detroit’s massive debt issues — brought on by a shrinking tax base generated from high unemployment and deserting residents — out of the hands of feuding city officials and creditors and under court supervision. And it’s given the city, which filed for Chapter 9 bankruptcy in July, a break from paying off its $18 billion debt while it assembles a restructuring plan for its finances.
The presiding judge called the hiatus “an opportunity for a fresh start.” But the eligibility for bankruptcy protection is by no means a get-out-of-jail-free card. That fresh start requires a plan approved by all parties involved, which could spell a month- or year-long embattled process of back-and-forth negotiations. For the citizens of Detroit, that means feeling the pinch of bankruptcy for an indefinite amount of time, the long-term effects of which remain unknown. Here’s what this week’s ruling means for the Motor City.
Pensions will be cut. Tuesday’s ruling would allow municipal pension cuts, even if those pensions are protected under the state’s constitution. However, cuts would only be approved if the judge presiding over the case finds the rest of the plan “fair and equitable,” the Detroit Free Press reports, setting the bar high for a credible plan.
Fire, police, and sanitation services will be scaled back. When a city enters bankruptcy, crucial public and maintenance services are usually the first to shrink. Personnel in sanitation services and fire and police departments will be cut. Fewer operating firehouses mean longer response times for emergencies. Maintenance of roads and public transportation sink to the bottom of the priority list, Potholes will grow larger and roads won’t be paved.
So will various city departments. City employees in a number of branches of local government will see cuts in wages and benefits, and the staffers who keep their jobs will be picking up the slack for the ones who don’t.
Taxes will increase — again. Tax hikes are not likely to sit well with Detroit residents, but for officials, they may become a necessary evil in helping to dig the city out of debt. Any measure requires a vote, and the majority of citizens must trust Detroit enough to let it pass. The city previously raised taxes as the threat of bankruptcy loomed, but such attempts failed to alleviate the city’s declining tax revenue.
City assets could be auctioned off. Restructuring city finances means evaluating everything the city owns, and seeing what can be sold or privatized. In dire times, auctioning off city assets, like public parks or sanitation operations, brings in a decent stream of cash. Such bargaining chips can even include what’s inside Detroit’s museums and zoos, USA TODAY reported this summer — paintings and animals worth thousands or millions of dollars.
Detroit may see the beginnings of a political shakeup. The city’s lawmakers may not hold office when Detroit pulls itself up out of debt. Phil Batchelor, the former interim city manager for Vallejo, Calif., which declared bankruptcy in 2008, told NPR last year, “Many of the people who were in office [in] the years leading up to it are gone. And we have new council members that have come in and helped to rebuild the city.”
What We're Following See More »
"The U.S. Supreme Court on Monday rejected a sweeping constitutional challenge to Seattle’s minimum wage law, in what could have been a test case for future legal attacks on similar measures across the country. In a one-line order, the justices declined to hear a case by the International Franchise Association and a group of Seattle franchisees, which had said in court papers that the city’s gradual wage increase to $15 discriminates against them in a way that violates the Constitution’s commerce clause."
Hillary Clinton may have the Democratic nomination sewn up, but Bernie Sanders apparently isn't buying it. Buoyed by a poll showing them in a "virtual tie," Sanders is "holding three rallies on the final day before the state primary and hoping to pull off a win after a tough week of election losses and campaign layoffs."
"The New Columbia Statehood Commission—composed of five District leaders including Mayor Muriel Bowser, D.C. Council Chairman Phil Mendelson, and D.C.'s congressional delegation—voted today to publicly release a draft of a new constitution for an eventual state next Friday, at the Lincoln Cottage." It's the first step in a statehood push this year that will include a constitutional convention in June and a referendum in November.
Amid outcry by President Reagan's children, actor Will Ferrell has pulled out of a movie that makes light of Reagan's Alzheimer's disease. A spokesperson for Ferrell said, “The ‘Reagan’ script is one of a number of scripts that had been submitted to Will Ferrell which he had considered. While it is by no means an ‘Alzheimer’s comedy’ as has been suggested, Mr. Ferrell is not pursuing this project."