Publications
Publications
- April 2015 (Revised April 2022)
- HBS Case Collection
Bankruptcy in the City of Detroit
By: Stuart Gilson, Kristin Mugford and Annelena Lobb
Abstract
The June 2013 bankruptcy of the city of Detroit, Michigan was, at the time, the largest municipal bankruptcy in American history. Detroit had struggled for years with a weakening tax base, high unemployment, a heavy debt load and increasing retiree costs. These financial strains led to cuts in basic public services, declines in population, and significant urban blight. The State of Michigan appointed an Emergency Manager, Kevyn Orr, to lead the city though the restructuring process. In March 2014 Kevin Orr and his team put forth a restructuring plan to the city's creditors that provides for needed reinvestment in City services, but low recoveries for unsecured creditors. The city's plan also proposes that a collection in the Detroit Institute of Art be transferred to a trust funded by philanthropists, with the proceeds accruing solely to retirees, rather than to all creditors. Kevyn Orr and his team must now find consensus on a plan that meets the needs of the city and is acceptable to its creditors.
Keywords
Chapter 9; Chapter 11; Bankruptcy; Municipal Finance; Restructuring; Financial Liquidity; Insolvency and Bankruptcy; City; Government Administration; Public Sector; Financial Crisis; Financial Management; Failure; Labor Unions; Urban Development; Budgets and Budgeting; Decision Making; Demographics; Economics; Finance; Public Administration Industry; Michigan; Detroit
Citation
Gilson, Stuart, Kristin Mugford, and Annelena Lobb. "Bankruptcy in the City of Detroit." Harvard Business School Case 215-070, April 2015. (Revised April 2022.)