At a press event at 10 a.m., Gov. Rick Snyder and Emergency Manager Kevyn Orr told assembled media that the move to enter bankruptcy proceedings late Thursday will give the city options down the line.
"I didn't view this as a terrible answer, because it presents options," Snyder said. "Now is the opportunity to stop 60 years of decline. Did anybody like the Detroit of five years ago, 10 years ago?"
Snyder said the drastic move will give the city a chance to deal with its systemic funding problems. "People have not stopped … kicking the can down the street'," he said.
Although the move has been on the table for months, as Detroit has struggled to get back to financial health for years. Municipal worker layoffs, service cutbacks and asset sales could be in the offing.
The city is even thinking about selling off its valuable art collection, including works by Picasso, van Gogh and Bruegel, to raise funds. There's also talk of selling venues such as the Detroit Zoo, or historic Fort Wayne, a tourist site in the city.
"Services will remain open, paycheques will be made, bills will be paid," Orr said.
With $18 billion in outstanding debts, few cities have felt the demise of America's manufacturing sector as acutely as Detroit. With a population of close to two million in the 1950s, the city now has about a three quarters of a million residents. The population has declined by 25 per cent in the last decade alone.
Detroit had the highest per-capita income of major American cities in 1960, but today has an unemployment rate of 18 per cent — more than twice the national average.
The city has more than 100,000 different creditors, its two largest being underfunded pension plans for city workers, and one for police and fire services. Those two plans are owned $2 billion US and $1.4 billion, respectively.
Orr was unable to convince the city's many creditors to accept less than full value for their debt, so the city entered bankruptcy proceedings as a last resort. Orr pitched the process as a viable option for all sides, and he hopes it will be completed within about 12 months.