Federal judge Steven Rhodes has approved a plan that will end Detroit’s historic Chapter 9 bankruptcy. The exit plan will give the city a chance to recover from decades of economic despair and inability to provide basic services to to its citizens.
Bankruptcy Exit Plan
Under Judge Rhodes’ decision, the city will shed $7 billion worth of debt. This is possible in large part because the city’s creditors have agreed to settle for less than is owed to them. Additionally, $1.4 billion will be reinvested over 10 years into public services and blight removal. The plan also calls for the improvement of government operations that could save the city money and perhaps increase the reinvestment plan to $1.7 billion.
Pension Cuts for Retired City Workers
An agreement was also reached with retired city workers who had been hit with pension cuts. Rhodes called the settlement with the pension workers a nearly “miraculous” outcome, overruling all objections to the city’s plan. “This city is insolvent and desperately needs to fix its future,” Rhodes said.
Detroit Able to Move Towards Financial Stability
“With Judge Rhodes’s historic decision, Detroit moves further along the path toward financial stability and success as a viable and attractive place to live, work and invest,” said Kevyn Orr, Detroit’s emergency manager. “My team and I are pleased that Judge Rhodes agrees that the Plan is the best way for the City to resolve its financial difficulties and remain on solid financial footing. This decision would not have been possible without the hard work, compromise and sacrifice of so many people and organizations that put aside their considerable differences and came together for the benefit of Detroit’s future.”
Source: Detroit Free Press, Judge OKs bankruptcy plan; a ‘miraculous’ outcome, November 7, 2013