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Judge: Detroit Can Proceed with Bankruptcy

Dorothy Rowley | 12/4/2013, 12:59 p.m.
A federal judge ruled that officials in Detroit can forge ahead with bankruptcy proceedings. (Courtesy photo)

A federal judge ruled that Detroit officials can proceed with the largest municipal bankruptcy filing in history — a measure that began in October to help eliminate some of the $18 billion for which the city is indebted.

According to a CBS News affiliate in Detroit, Judge Steven Rhodes concluded in his Dec. 3 ruling that the city filed its petition properly but said negotiations were impractical because of the huge number of creditors, which total more than 100,000.

"The city cannot legally increase its tax revenues nor can it further reduce its expenses without further endangering health and safety," Rhodes said, noting that retiree pensions have been targeted for cuts.

Representatives for unions and pension funds contend that the city should not be eligible to use bankruptcy court protections, stating that regardless of Detroit's financial straits, city and state officials failed to negotiate in good faith with its creditors in an effort to reach a deal on its liabilities.

“The bottom line here is that it’s a matter of choices and it’s a matter of who gets paid first,” said union leader Michael Artz.

“In the bankruptcy procedure you’re looking at the banks being paid off before the other stakeholders [and] before the pensioners – and we don’t think that’s right, and that’s why we opposed the bankruptcy in the first place and that’s why we’ve appealed the decision,” Artz said. “This is a moral choice that city leaders are making to favor banks and corporate interests over people.”

Detroit, which for decades had been a symbol of American corporate strength, now boasts a population of 700,000 people compared to 2 million who lived there at its peak during the 1950s.

The city currently has 78,000 vacant buildings and 40 percent of its street lights are not working.

Mayor David Bing conceded that the bankruptcy proceedings will be unpleasant for many and result in "pain for a lot of different people," but said it is necessary to get Detroit back on track.

“It’s really going to hurt,” he said. “[But] as tough as it's going to be, it's important for the future of the city that we get this behind us.”