Stuck in Reverse, Detroit Edges Closer to BankruptcySubmitted by bobbyw24 on Tue, 01/29/2013 - 07:19
General Motors and Chrysler, which along with Ford gave the Motor City its identity, survived near-death experiences after filing for bankruptcy during the financial crisis. Now, Detroit itself is edging closer to a similar precipice, only unlike the automakers, its chances of getting a federal bailout are almost nonexistent.
The story of Detroit's decline is decades old: Its tax revenue and population have shrunk and labor costs have remained out of whack. But the city's budget problems have deepened to such an extent that it could run out of cash in a matter of weeks or months and ultimately be forced into what would be the largest-ever Chapter 9 municipal bankruptcy filing in the United States.
Frustrated by the lack of concrete progress, Michigan Governor Rick Snyder, a Republican, last month appointed a team to scour the city's books. The audit could result in a state takeover of Detroit's finances through the appointment of an emergency financial manager. Such a manager, who would seize control of the city's checkbook, could then propose federal bankruptcy court as the best option.