Detroit's Bankruptcy Exit Plan Approved

Sixteen months after the Motor City declared bankruptcy, a federal judge approved of Detroit’s plan to move forward in repaying its debt, reports Michael Fletcher of The Washington Post.

For one, Detroit will set aside "$1.7 billion in new investments over the next nine years — a vast sum for a city that for decades has been trimming investments and in recent years had capital expenditures of just $10 million... The money will go to new computer systems, fire trucks, ambulances and other infrastructure aimed at reviving city services that in many cases had failed to function in recent years."


In addition, according to Monica Davey and Mary Williams Walsh of The New York Times, "Retired general municipal workers agreed to 4.5 percent cuts to their monthly pension checks, an end to cost-of-living increases, higher health care costs and a mandatory forfeiture of previous payments from the pension system that were deemed improper. Retired police officers and fire fighters have accepted smaller reductions."


Detroit’s retirees were a major stakeholder in the negotiations process, and they received a better deal than first proposed due to the "grand bargain," where "foundations, the state and the Detroit Institute of Arts pledged millions of dollars to bolster the city pension system and give the art collection new, bankruptcy-proof ownership."



Despite this new ruling, Detroit’s future is still hazy as the bankruptcy plans leave little financial wiggle room for the future. However, the deal does limit the amount of appellate litigation the Motor City could face in the future, as these are costly legal wars are being waged by many other bankrupt jurisdictions as they exit bankruptcy.