U.S. Bankruptcy Judge Steven Rhodes ruled earlier today that the City of Detroit is eligible for Chapter 9 bankruptcy protection, clearing the way for proceedings to restructure city debt and resources to clear the $18 billion hole. Pension funds for workers and the prized art collection from the Detroit Institute of Arts (among other things) are now directly in the cross hairs of banks and creditors.
If you think that this blog entry stands in contrast to my previous entries touting Detroit’s comeback you would be right… and wrong! The momentum is indeed very real, but the affairs of the municipal government are at present a drag on the progress. It is a strange but interesting time, for sure.
As for the bankruptcy, there is plenty of blame to around. Here is a statement from League President Jacqueline Noonan, mayor of the city of Utica, on the ruling. She makes some excellent points.
“The ruling is a stark reminder and affirmation of the critical need for the Legislature, Gov. Snyder and local elected officials to work together to develop a policy plan and vision for the future of Michigan’s cities, where the vast majority of jobs and economic, cultural and educational activity occurs in our state. It is a reminder of the need to fix the state’s broken municipal finance system, under which the Legislature and Governor have taken about $5 billion in funds that, by state law, were supposed to go to local governments as statutory revenue sharing, including to the City of Detroit. The Legislature, instead, kept the money to pay for state programs and services, according to a report by the highly respected, nonpartisan Citizens Research Council of Michigan.
“It’s worth noting that during the last decade state spending increased 26 percent, while local governments throughout Michigan struggled to pay bills and meet other financial obligations, and had to shed nearly 17 percent of all local government workers. Instead of balancing the state budget on the backs of local governments for the last 10-plus years, we need state government to embrace and advance policies that enable local communities to better manage our programs and services and become the types of places that can prosper once again, where educated entrepreneurial people want to live, work and raise families.
“To move Michigan forward, the League, along with numerous partners, have developed a policy vision and plan for Michigan’s cities called the Partnership for Place: An Agenda for a Competitive 21st Century Michigan. You can view this policy agenda here: www.mml.org/advocacy/partnership-for-place.html.”