Weekend Economists Salute Our (Founding) Fathers June 14-16, 2013

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41. Detroit Peddles Its Municipal Assets to Avoid Record Bankruptcy

http://www.bloomberg.com/news/2013-06-14/detroit-on-bankruptcy-s-brink-stops-paying-some-debts-orr-says.html

Detroit (9845MF) is suspending payments on $2 billion of unsecured debt, marketing parking garages and telling retirees to rely on President Barack Obama’s health-care law to avoid a record municipal bankruptcy.

Those are among proposed changes in a 128-page restructuring plan Emergency Manager Kevyn Orr offered yesterday at a meeting of creditors in Detroit. The moves, including spending $1.25 billion over 10 years to bolster safety and remove blight, will give an insolvent city a viable future, Orr said.

“We have to strike a balance between the legacy obligations to our creditors and our employees and retirees and the duty as a city to 700,000 residents for lights, police, fire, emergency management, cleaning the streets,” Orr told reporters after the meeting.

With a $39.7 million missed payment yesterday on debt issued to fund pensions, Detroit becomes the most populous U.S. city to default since Cleveland in 1978. Unsecured creditors may receive less than 10 cents on the dollar under a deal Orr offered to more than 100 creditors and union officials who met at a Detroit Metropolitan Airport hotel.