After Detroit became the largest institution to seek protection from bankruptcy last July, city workers and retirees knew that money owed to them via benefits or pensions was now at risk. A city that was a powerhouse of American industry just sixty years ago, has now fallen into such disrepair that it’s being compared to a Third World country. Now, the fate of the city lies in the results of a trial where Detroit must not only prove itself financially insolvent but that it in fact exhausted all reasonable options to negotiate with its many creditors.
According to Reuters, “attorneys representing the city’s unions, retirees, and pension funds,” claimed “that [Detroit City Manager Kevyn] Orr and his were intent on filing bankruptcy and not make best efforts to negotiate with them prior to” filing for bankruptcy. Kenneth Buckfire, a financial consultant for the city, called the need to cut the payments to retirees and employee pensions a requirement of arithmetic. He testified that “it was clear that the city did not have the funds to pay the unsecured pension payouts without cutting them.”
In testimony given by Michigan Governor Rick Snyder, according to the AP, he said “lawsuits filed against him, the state-appointed Detroit emergency manager, and others proved the final straw that led him to authorize the city to file for bankruptcy.” As it stands now, the retirees are poised to get about 16 cents on the dollar for what the city owes them.
While this trial plays out, the Obama Administration has pledged close to $300 million to “help shore up basic infrastructure priorities, such as improving public transit and police and eradicating blight,” according to a September report from The Christian Science Monitor. A third of that money is going towards the destruction of abandoned buildings in the hope to encourage new development in troubled areas.