Detroit, Michigan, may be the nations only large city to have sported three distinct pronunciations: the original French, du-TWAH; the 19th century American, deh-TROIT; and the more recent and homegrown DEE-troit. A fourth may soon evolve: DEBT-troit.
The City of Detroit owes to creditors $18 billion that it cannot pay back. Most of the debt is owed to those who provided loans to the city by buying its bonds; next in line are the nearly 30,000 retired and still working city employees owed billions collectively in future pension benefits, which are woefully underfunded.
Detroit has been ailing for decades, losing more than a million residents as it slipped from the nations fourth largest city and a vibrant economic engine to the 18th largest and a financial basket-case. You will find, littered across the town, over 70,000 abandoned homes, one for every ten remaining residents.
Some suggest the city never really recovered from the 1967 riots. That would make 46 years of non-recovery.
A federal bailout saved General Motors and Chrysler, but no bailout appears in the offing for the Motor City itself: last week its state-appointed emergency manager went to court to declare that Detroit was belly up — the nations largest-ever municipal bankruptcy.
Sure, it might be easy for folks far away from Detroit to brush this story off their shoulders or to simply mutter, Poor Detroit, as if their own cities were immune to such outrageous fortune. Sadly, however, the truly frightening thing about the failure of Americas once great Motor City isnt merely a decades-long slog of big government programs and promises gone awry. What is more scary, because it is more relevant to most of us, is that our own cities are currently embracing the same stupid policies and employing politicians making the same unfunded promises.
Last week, Moodys Investor Services downgraded the bond ratings of two major cities, neither named Detroit.
Chicago likely will have to pay more to borrow money after Moodys downgraded the citys credit rating and says the outlook for the future is negative, reported WLS-TV, the citys ABC affiliate. Moodys Investors Service lays the blame squarely on the citys large and growing pension liabilities.
Moodys found the city had only 22 percent of the assets needed to meet its obligations. In 2012 alone, Chicago shortchanged its annual required pension contribution by more than a billion dollars.