Detroit Update .... More on the Biggest Municipal Bankruptcy in U.S. History

Detroit Files for Chapter 9 Bankruptcy has the afternoon's late breaking news story:

"The city of Detroit filed for federal bankruptcy protection on Thursday afternoon, making the automobile capital and onetime music powerhouse the country's largest-ever municipal bankruptcy case.

The Chapter 9 case filed in U.S. District Court for the Eastern District of Michigan came after Kevyn Orr, the emergency manager, failed to reach agreements with enough of the bondholders, pension funds and other creditors to restructure Detroit's debt outside of court. The final decision rested with Republican Gov. Rick Snyder, who had appointed Mr. Orr as Detroit's overseer in March.

It was expected that the city would report long-term liabilities close to $20 billion. The city's assets were less clear, but Mr. Orr had called the city functionally insolvent and recently missed a payment to the city's pension system of nearly $40 million.

The financial outlook has never been bleaker for the Motor City, which has shrunk from its peak of nearly two million people in 1950 to 700,000 today.

Hurt by a flight of residents and businesses to the suburbs, cuts in state aid and a crash in real-estate values, Detroit borrowed to meet operating costs as well as long-term liabilities such as pensions and health care for retired city workers.

As a result, Detroit has spent on average $100 million more than it took in every year since 2008.

Most at risk under the bankruptcy case is the city's $11 billion in unsecured debt. That includes almost $6 billion in health and other benefits for retirees; more than $3 billion for retiree pensions; and about $530 million in general-obligation bonds.

Municipal-worker retirees are set to get less than 10% of what they are owed under a plan Mr. Orr disclosed last month."

Summing Up

Although hardly a surprise, the city's bankruptcy filing still is shocking.

That said, it's not an omen of things to come generally across the nation.

Nevertheless, it is time to decide to live within our means and stop acting as if we believe there is a government and/or union tooth fairy who will keep us well fed, well paid and safe and secure from having the responsibility to adequately provide for ourselves.

That's our responsibility.

Thanks. Bob.