Michigan Governor Rick Snyder has said Detroit may have hit rock bottom with its bankruptcy filing, but the move will reverse decades of decay.
The Republican said the city – once the birthplace of the US car industry, now groaning under $ 18bn (£12bn) of debt – deserves a fresh start.
Detroit has faced decades of problems linked to declining industry.
Public services are nearing collapse and about 70,000 properties lie abandoned.
Gov Snyder said the city had filed for bankruptcy on Thursday because it was “basically broke”.
“Many people may step back and say this is the lowest point in Detroit’s history,” he told a news conference. “The history books may say that.
Detroit’s fall is complete. It is a depressing, if inevitable, end to a grotesque saga of decline, corruption and mismanagement. The irony is that the bankruptcy comes just as the private sector is picking up in Motor City. There is a buzz downtown, with commercial and residential occupancy at record levels.
But public services are in a state of near collapse. Around 70,000 properties lie abandoned. Great swathes of the city need to be written off. For some, the announcement will come as some kind of relief. When I was last there business leaders told me that some kind of decision had to be taken about the city’s future – that agonising limbo was unsustainable.
The problem now is not just image. Bankruptcy looks bad. But Detroit is already a poster child for urban failure. Nor is it just about being locked out of capital markets – few would lend to the city anyway. But bankruptcy could take years to sort out, when Detroit’s real world problems need urgent remedies.
“But what would happen if we didn’t do this act? Detroit would continue to go downhill and it wouldn’t be the lowest day in Detroit’s history, they would continue day after day and that’s not right, again for the citizens.”
He added: “We will come out with a stronger, better Detroit and a format to grow this city. The citizens of not just this city but the state deserve it.”
Gov Snyder was flanked by state-appointed emergency manager Kevyn Orr, who suggested last month that the city’s long-term debt could be as high as $ 20bn.
Mr Orr will be allowed to liquidate city assets to satisfy creditors and pensions, if the bankruptcy filing is approved by a federal court.
Detroit – known as Motor City for its once-thriving automobile industry – stopped unsecured-debt payments last month to keep the city running.
Mr Orr proposed a deal in June in which creditors would accept 10 cents for every dollar they were owed. It is currently paying 38 cents on the dollar.
But two pension funds representing retired city workers resisted the plan.
Ed McNeil, the lead negotiator for a coalition of 33 unions, told Reuters news agency the move was about “busting the unions”.
“This is not about fixing the city’s finances,” he said. “It’s about the governor and his own agenda to take over the city of Detroit.”
The White House said it was closely monitoring developments in Detroit.
US car company General Motors said on Thursday it did not expect any impact on its operations.
The city has struggled with its finances for some time, driven by a number of factors, including a steep population loss.
The murder rate is at a 40-year high and only one third of its ambulances were in service in early 2013.
Police response times to 911 calls average 58 minutes, compared with 11 minutes nationally.
And Detroit’s government has been hit by a string of corruption scandals over the years.
Between 2000-10, the number of residents declined by 250,000 as residents moved away.
Detroit is only the latest US city to file for bankruptcy in recent years.
In 2012, three California cities – Stockton, Mammoth Lakes and San Bernardino – took the step.
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