DETROIT, Nov. 7 (UPI) -- Detroit can write off $7 billion in long-term debt, a federal judge said Friday, approving a plan to end the biggest municipal bankruptcy in U.S. history.
U.S. Bankruptcy Judge Steven Rhodes ruled 15 months after the city filed for Chapter 9 bankruptcy protection. He found the plan is fair to creditors.
The plan calls for an investment of $1.4 billion in the next decade in city services. Detroit will be operating with a new financial oversight board reviewing its finances for more than a decade.
"This city is insolvent and desperately needs to fix its future," Rhodes said.
Related
Founded as a French outpost in 1701, Detroit in the 20th century became the center of the U.S. auto industry. But the city, which had 1.8 million residents in 1950, went into a long decline as auto plants moved elsewhere and the population dwindled to about 680,000.
When Detroit filed for bankruptcy, it had about $18 billion in debt. Officials said that raising taxes was not an option in a city awash in abandoned houses and factories.
A "grand bargain" with the state of Michigan and private sources of funds was critical to the bankruptcy plan, providing millions of dollars in state aid to minimize pension cuts for city retirees and to keep one of the city's landmarks, the Detroit Institute of Arts.
Creditors suggested selling the institute's collection, which was appraised this year at more than $8 billion. The institute, the second-largest city-owned museum in the United States, is known for its Impressionist and modern collections and the Diego Rivera "Detroit Industry" murals in its central court.
In June, as part of the bargain to help the city, GM, Ford and Chrysler pledged $26 million to keep the collection intact.
