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Detroit files for bankruptcy

Fizil said:
I've never understood how the city can resist intrusion by the state government. The municipalities in Michigan exist purely with the permission of the State don't they? Are there articles in the state constitution that prevent the state government from arbitrarily interfering with a municipality once it has been chartered? I understand the people in a municipality not wanting the interference to happen, but I always assumed that the state had the authority to take over management of the city but simply didn't use it till recently.
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I'd imagine there are probably quite a few legal obstacles to arbitrarily usurping the authority of elected and appointed city officials, but you'll have to dig into Michigan law to find out the details; I don't have them. And of course the details will probably vary widely from state to state.
 
theprestige said:
I'd imagine there are probably quite a few legal obstacles to arbitrarily usurping the authority of elected and appointed city officials, but you'll have to dig into Michigan law to find out the details; I don't have them. And of course the details will probably vary widely from state to state.
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Yeah, a quick look shows that Michigan has home rule provisions in it's laws governing the creation of cities. So I guess it isn't as simple as I had thought.

Home Rule in the United States

eta: Of course that list also says Michigan follows Dillon's Rule, which says "Municipal corporations owe their origin to, and derive their powers and rights wholly from, the legislature. It breathes into them the breath of life, without which they cannot exist. As it creates, so may it destroy. If it may destroy, it may abridge and control."

I guess the only way to find out what's what would be to find all state laws pertaining to this, and I don't really feel like sifting through the entire Michigan legal code.

eta2: Ok I think I have a handle on this now. A Home Rule state that doesn't use Dillon's Rule has basically ceded authority to local governments and cannot constitutionally revoke that authority. A Home Rule state that does use Dillon's Rule cedes authority to the local governments, but that authority can be rescinded at any time if the legislature passes a law to do so. So if I'm understanding this correctly. If Michigan were not a Home Rule state the cities would only have powers explicitly given to them by the state government (state doesn't care about noise ordinances, tough luck). If Michigan did not use Dillon's Rule then it would have required a constitutional amendment to install an Emergency Manager in Detroit, rather than a simple act of the legislature.

Or I could be completely wrong, I knew there was a reason I never became a lawyer.
 
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Fizil said:
I've never understood how the city can resist intrusion by the state government. The municipalities in Michigan exist purely with the permission of the State don't they? Are there articles in the state constitution that prevent the state government from arbitrarily interfering with a municipality once it has been chartered? I understand the people in a municipality not wanting the interference to happen, but I always assumed that the state had the authority to take over management of the city but simply didn't use it till recently.
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If Detroit goes to the state of Michigan asking for help with its finances, then it stands to reason that the state would have a say as to how its finances are managed. Naturally this means that the city will be managed by state appointed administrators rather than the democratically elected officials of the city. I don't think the state can (or particularly would want to) take over this way unless the circumstances are dire.
 
ravdin said:
If Detroit goes to the state of Michigan asking for help with its finances, then it stands to reason that the state would have a say as to how its finances are managed. Naturally this means that the city will be managed by state appointed administrators rather than the democratically elected officials of the city. I don't think the state can (or particularly would want to) take over this way unless the circumstances are dire.
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That already happened. The city has had a state appointed emergency manager to oversee it's financials since March. His name is Kevyn Orr. I'm sure he's a fine lawyer and human being but it's almost a case of too little too late. Sometimes bankruptcy is the only way out.
 
theprestige said:
The city is bankrupt. The creditors are probably going to take a haircut.

When you say that in the UK, "the central government would step in", what do you mean, exactly?
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UK cities (well councils to be exact) are legaly required to set budgets that are either balanced or have an active surplus.
 
geni said:
UK cities (well councils to be exact) are legaly required to set budgets that are either balanced or have an active surplus.
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What do they do when roughly half the tax parcels fail to pay?
 
Skibum said:
What do they do when roughly half the tax parcels fail to pay?
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Take them to court? In practice particularly in poorer areas a large enough chunk of council funding comes from centeral goverment that they would still be able to function.
 
Skibum said:
Nobody left to tax?
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Pretty much. The old industrial base is gone, the population has declined 60%.

anglolawyer said:
How can a city go bankrupt? What does it mean in ordinary, everyday terms. America is an amazing place.
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Pretty much like a person or corporation.
Remember local government in the USA isn't subject to the same level of oversight from higher levels as in the UK.

anglolawyer said:
Incredible. Like a ghost town of the wild west.
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Worse than Gary in the 'eighties.
 
And while all this was crumbling, the socialist city unions were getting rises in pensions pushed through? Biggest debt holder is the pension fund? Another institution gone bankrupt due to defined benefit retirement plans, rather than defined contribution. Just like GM?
 
wobs said:
Detroit in pictures:
http://www.time.com/time/photogallery/0,29307,1882089,00.html
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A few comments on those pictures.

Michigan Central station is owned by this guy:

http://en.wikipedia.org/wiki/Manuel_Moroun

He is a billionaire that owns the Ambassador Bridge. He is friend of the Koch brothers. His efforts to stop a new bridge that would be owned by the Michigan and Ontario have made him a seriously unpopular in the state. If he actually had a plan for the building he could come up with the money to do something. Instead it sits there rotting.

United Artist Theater? Yes that is bad. But then there is the Fox:

http://en.wikipedia.org/wiki/Fox_Theatre_(Detroit,_Michigan)

The Fox was also closed and left to rot. Restored by current owner Mike Ilitch, who has done more than any other person to try and rebuild parts of Detroit. (Also owns Little Ceasers pizza and several of the local sports teams.) There are a few other restored theaters around as well.

The ruin porn does show how bad things can be but does not give you a balanced picture of what is going on.
 
Doubt said:
The ruin porn does show how bad things can be but does not give you a balanced picture of what is going on.
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Indeed if you poke around urban exploration forums you can find things in most cities to match that. Things get abandoned all the time. Only difference is that in cities with better economies they tend to get knocked down and built on.
 
LTC8K6 said:
http://www.governing.com/gov-data/municipal-cities-counties-bankruptcies-and-defaults.html

Bankrupt Cities, Municipalities List and Map
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Flint is likely to be out from under the emergency manager soon. Restructuring there appears to have gone well but long term results are not very predictable.

Hamtramck and Ecorse both had emergency managers before under some weaker laws. Both failed again.

The manager running Pontiac was running Ecorse the first time they went under. I will be watching Pontiac closely since I grew up there. It does not look promising to me.
 
theprestige said:
They borrow money to pay their operating costs or invest in capital improvements., and don't gather enough revenue to pay back the loans. They declare bankruptcy as a way of voiding those debts and subjecting their creditors to some sort of mitigated, equitable repayment solution.

ETA: Which part amazes you? Does the UK not have a similar bankruptcy provision in law? Do UK municipalities never borrow funds? Do UK municipalities never risk gathering less revenue than needed to pay off their debts? Do UK municipalities enjoy an exemption in law from paying off their debts?
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In Australian terms I would hope that the state would never let a city reach such a point, or if not the state then the federal government would take care of things. I cannot see how a state or country can sit by while one of their cities suffers like this.

The U.S. bailed out banks and car manufacturers. Will it do the same with the city of Detroit?
 
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