“What happened in Detroit should never happen again.” It is this final sentence of Steven Rhodes uttered on Friday, November 7, as the judge concluded the most painful chapter of the capital of the US auto, during a judgment approving a plan to get the city out of bankruptcy.
After a little less than sixteen months of negotiations, the justice gave the green light to the renegotiation of the huge debt of Detroit, calling it legally reasonable, just and fair for the thousands of creditors of the city.
This plan aims to end the vicious circle in which Detroit had returned in recent years. The collapse of its population, the inexorable reduction in tax revenue to the rhythm of its industrial decline, pervasive corruption and management errors led the city to bankruptcy.
Hard edge solutions
The plan provides for the cancellation of nearly a third of the debt ($7 billion on 18 billion accumulated over time). In return, the city’s finances are put under surveillance, while the administration will be the subject of a major restructuring. A portion of the funds ($1.7 billion) will be invested in completely dilapidated services such as firefighters or police. Machinery should be renovated to upgrade IT services that became obsolete. The plan also includes a real estate component to rehabilitate some 80,000 buildings that have been abandoned for lack of funds.
Justice Rhodes warned the mayor, Mike Duggan, not to spoil the opportunity for a “fresh start”. “It is now time to restore democracy to the people of Detroit,” he added solemnly. “The failure of Detroit to provide the most basic municipal services” constitute “inhuman and intolerable situation that must be resolved. This plan addresses these issues,” said the judge.