DETROIT (AP) — More than a year after Detroit filed for the largest public bankruptcy in U.S. history, a federal judge is hearing evidence on whether he should approve the city's plan to emerge from billions of dollars in debt. Here's a look at the past, present and future of the city's finances:
For decades, Detroit paid its bills by borrowing money while struggling to provide the most basic of services for residents. The city, once fueled by the massive auto industry it gave birth to, shrunk from 1.8 million people six decades ago to fewer than 700,000 now.
So, when Detroit finally succumbed and filed for bankruptcy in July 2013, its long-term debt exceeded $18 billion. The city expects to get that down to $5 billion if Judge Steven Rhodes approves the plan put forth by state-appointed emergency manager Kevyn Orr.
Rhodes has scheduled dates into mid-October, if needed, to determine whether the city's plan is fair to creditors and feasible for the city. The judge will hear from city leaders, including Orr and Mayor Mike Duggan, and creditors who oppose the plan. Both sides have up to 85 hours to present their arguments and testimony, and Rhodes also has his own experts to advise him.
The strongest opposition to the plan has come from bond insurers, such as New York-based Syncora Guarantee. Syncora has said its claim is about $400 million and that Detroit has unfairly discriminated against financial creditors primarily through what's been called the Grand Bargain — a court-mediated agreement finalized this summer.
That deal among the state, major corporations and foundations promises more than $800 million over 20 years to support city retiree pensions. General retirees would take a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise. It would also stave off the sale of city-owned pieces in the Detroit Institute of Arts — home to hundreds of paintings and sculptures by Van Gogh, Bruegel the Elder, Renoir and other masters — to help pay off the city's debt.
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