On
July 18th, Detroit filed for bankruptcy after being unable to pay
back their debts. In an effort to avoid
any sort of bankruptcy, Emergency Manager Kevyn Orr tried to convince creditors
to accept a tenth of their money in return, to which they declined. Orr then tried to cut retiree benefits in an
effort to reduce the city’s budget. As a
result, Detroit’s two largest pension funds filed lawsuits against Orr so that
their benefits would not be cut. The
next day, Detroit filed Chapter 9 bankruptcy in an amount between $18 and $20
million. On the 19th of July,
a judge named Aquilina found that the bankruptcy was unconstitutional. According to the constitution of Michigan, no
division of the state can default on pension loans. Aquilina order Governor Snyder to withdraw
his bankruptcy filing, but instead, he chose to appeal her decision. This caused Detroit to be in and out of court
with a final court date set on October 23rd, to which no decision
has yet been made.
On
November 8th, the bankruptcy court had the final trial of the
Detroit case regarding the eligibility of Detroit to file for bankruptcy. The
case went to trial, as mentioned before, for being unconstituitional. Case
Judge Steven Rhodes addressed the main allegations that the city of Detroit did
not use bankruptcy as a last resort and rather, they were not able to conduct
negotiations of good will to avoid filing Chapter 9. Lead Counsel, Bruce
Bennett made the statement that filing for bankruptcy was not desired but
rather inevitable because creditors were not willing for compromise. Kevyn Orr
released a statement that despite negotiations failing he plans on introducing
a new plan of payments to reduce the debt and eventually find the optimal way
to pay off creditors. Rhodes has not made a decision on the eligibility yet and
further review is underway.
A
common source of income for Detroit is through filming. As a short-term attempt to help with the
bankruptcy, Detroit offered the new Superman movie about $35million in tax
incentives to film there. According to
Zack Snyder, “Detroit is the quintessential example of an American City”. It is anticipated that movie will hire about
420 new full time employees; the crew will use about 500 vendors and about
$5million on hotel bills for the cast and crew.
Detroit will also make money from the cast and crew who will have to use
their paychecks while staying in the city for an extended period of time. Detroit commonly uses various films to make
their money, but because of their situation, they were forced to offer
incentives to Zack Snyder to encourage him to film in the city.
Detroit,
like New York and Chicago, has been recognized as one of the “true” American
cities of the United States. It is very important for the Motor City to once
again flourish. It’s not going to be easy and as you can see, there are very
few options to start this rehabilitation, or revival of sorts. One of the
possibilities is do what the city did with movies and other industries. The movies
create jobs; market the city and potential increase income flow into the city. Chapter 9 perhaps isn’t the most ideal
scenario but it was one that really opened the eyes of Detroit and of the
United States to find an economic plan that will help conserve and progress the
economy of the United States.
Jay Hirpara & Kayla Rhodes
Works Cited
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