Editorial

Detroit’s bankruptcy

7/21/2013

Nobody should be greatly surprised that Detroit has become the largest city in U.S. history to file for municipal bankruptcy. Detroit is virtually out of cash, an eye-popping $19 billion in debt, and — for its own good — no longer able to borrow money.

Emergency manager Kevyn Orr, who has been feverishly trying to negotiate with the city’s creditors, might have waited slightly longer to file. But his hand was forced when he learned that city employees and retirees were about to seek an injunction to prevent a bankruptcy filing. On Friday, a state judge ordered Mr. Orr to withdraw the bankruptcy petition, claiming the state law that authorizes the filing violates Michigan’s constitution.

Uncharted waters lie ahead. Presuming the city’s application is ultimately granted, a federal judge will be appointed to begin a process that could take years.

Oddly enough, in the short term, Detroiters’ lives are likely to get better. City officials will stop paying creditors and use what money they have to improve services, principally public safety.

In the long run, though, everyone is going to feel pain. Employees and retirees will lose some pension and health-care benefits. Some assets, possibly even paintings from the world-renowned Detroit Institute of Arts, could be sold.

There has been a lot of finger-pointing about who is most to blame for Detroit’s sorry state. The answer is everyone, from those who used Detroit up and then abandoned it, to news media that failed to exercise their fiscal watchdog function, to politicians who mismanaged money, signed contracts they could never live up to, and borrowed funds they could never hope to repay.

The entire region needs to hope that Detroit emerges from bankruptcy in a position to start over as a city that can provide services for its residents, attract growth, and pay its bills. Toledoans — and residents of every other city — should study what has happened to one of the nation’s great cities, and use Detroit’s example as a cautionary tale.