The recent decision by a U.S. judge to allow the City of Detroit to potentially shed billions in debt is raising concern among some for a Canadian city.
Some fear that Detroit's financial situation, which is the largest public bankruptcy in U.S. history, may be replicated in Calgary as the cities share similarities including reliance on a few key major industries and heavy investment in infrastructure.
Detroit was the once-mighty symbol of the United State's manufacturing strength but faced a long, slow decline in population and auto manufacturing.
High demands for Detroit-made industrial products, mainly automobile production starting in the 1950s, lead to rapid economic growth and a large tax base, reports Joseph Arvai for The Global and Mail.
The tax base was used to justify huge investments in infrastructure, which dwindled as residents started to move away, and key industry players moved away as competition rose and they found cheaper, more innovative alternatives.
"Just like in Detroit, much of Calgary’s current growth is built on an industrial base that is at the mercy of fickle consumers, and is increasingly under siege from competitors," says Arvai.
"Even if industry’s and government’s much-hyped pipelines are built, it’s only a matter of time before alternatives to energy from Alberta dominate the global marketplace," he adds.
Cities can take on large debts for infrastructure projects, but provinces enforce strict rules on how much debt can be inccured, CBC News reports.
"If they get into trouble — even with those rules — then the province would step in with a supervisor to help them," said Enid Slack, director of the Institute on Municipal Finance and Governance at the University of Toronto, earlier this year when Detroit first declared bankruptcy.
Many took to social media to share their thoughts if bankruptcy was in Calgary's future.
"Calgary is not Detroit & Canada is not the USA," said one user on Twitter, adding that the cities had many structural differences and that the article was flawed.
"Could this really happen to Calgary? Yes, it absolutely could. We're a one-horse town," said another.
Sun News television personality Ezra Levant took offense to the article, calling the author a, "Total kook. Embarrassment to the University of Calgary. Self-hating westerner," on Twitter.
Detroit's bankruptcy also means that the city will negotiate with its creditors, including retirees who are owed pensions, bondholders, insurers and other vendors.
Judge Steven Rhodes turned down objections in his ruling from unions, pension funds and retirees, which, like other creditors, could lose under any plan to solve $18 billion in long-term liabilities.
With files from The Canadian Press
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