Known commonly as the motor city, Detroit, home to the headquarters of three big automotive companies; General Motors, Ford, and Chrysler has filed for bankruptcy after being unable to repay the debts amounting to approximately $18 billion.
Below reads more insight into the bankruptcy application filed by the city of Detroit.
United States President Barack Obama has stated that the American economy is on its way to stability, however other factors are proving this statement to be false. One of the largest cities of America, Detroit, registered a plea, declaring itself bankrupt. Today the city has debts amounting to $18 billion and is unable to repay its loan.
That is why the city's Emergency Manager Kevyn Orr filed a plea, declaring the city bankrupt. The population of the city is about 700,000 now, which is less than the half of its population in 1950. About 1 300,000 citizens have left Detroit over the last few years due to high unemployment rates and rising crime rates.
Most of the buildings have no occupants, causing the real estate market in the city to diminish. Clearly, the individuals that chose to flee, are leaving to secure a bright future for themselves but in return the city is climbing their way to a higher amount of debt.
Here are some additional reasons behind Detroit's financial crisis;
1. Detroit is facing such a large amount of debt due to the growing corruption in the city. Under the mayorship of Kwame Kilpatrick, Detroit was plagued by numerous scandals. Kilpatrick eventually resigned after being convicted on felony counts, including perjury and obstruction of justice.
2. Detroit is facing a straight loss of $380 million in its annual budget. Detroit spends more on its City Council than any other city in the state, including the cities in which the population is much larger when it comes to overall compensation for its council members.
4. Detroit is declared as the most violent city of America as of 2013, as well as the city with the highest crime rate. In 2011, about 15245 crimes were listed in Detroit. Detroit is also considered as a drug capital of U.S.
5. Due to corrupt and unbalanced governance, the automotive industry of the city has almost stopped manufacturing.
6. Residents of Detroit pay the highest tax rate in the state and receive the lowest level of services.
However, some trade unions of the city are not happy with its administration. They declare it a way to acquire government properties by filing a bankruptcy plea. Another plea was filed in the city court against the decision of Detroit's administration.
If the city declares bankruptcy then the plan is to have the administration repay the loan by selling some government properties. Ensuring the administrative officers will continue to be paid their salaries and pension funds, letting the city renew some loans, relieving the Detroit from some of its financial debt.