July 18 Detroit's financial decline that led on
Thursday to the biggest U.S. municipal bankruptcy filing in the
country's history can be traced back to the waning days of
long-time Mayor Coleman Young's administration (1974-1993), when
the city was already deep in debt and struggling with a budget
Both Young and the Michigan state treasurer raised concerns
over potential bankruptcy. Moody's Investors Service cut the
city's debt rating into junk in July 1992.
- Mayor Dennis Archer's administration (1994-2001) brought a
mini-renaissance, as new developments, including casinos and
baseball and football stadiums, bolstered the city's budget.
Credit ratings rose to solid investment-grade levels.
- Budget deficits and late financial audits popped up during
Mayor Kwame Kilpatrick's term (2002-2008), prompting city
officials to fret about a potential takeover by the state of
Michigan. Credits ratings on some of the city's bonds fell again
into the junk category.
- In September 2008, Kilpatrick left office after pleading
guilty to obstruction of justice charges, and City Council
President Kenneth Cockrel became interim mayor.
- Dave Bing won the May 5, 2009, election for mayor. The
prospectus for a March 2010 Detroit bond sale aimed at reducing
the city's $326 million cumulative deficit laid out bankruptcy
risks for potential investors. All of the city's credit ratings
were in the junk category.
- The U.S. Census reported in March 2011 that Detroit's
population fell in 2010 to 713,777 - a 100-year low and a 25
percent decline from 2000. The drop threatened key tax revenue
sources that were tied to a population of at least 750,000.
- Michigan Governor Rick Snyder in June 2011 signed
legislation allowing Detroit to continue collecting income and
utility taxes. Bing warned in November 2011 that Detroit faced a
projected cash shortfall of about $150 million by the end of
- On Dec. 2, 2011, Michigan launched a preliminary review of
Detroit's finances, citing the looming cash crunch. That initial
review found the city had a mounting debt problem with long-term
liabilities estimated to top $12 billion versus an annual budget
of about $3.1 billion. The state used a new law that made it
easier to intervene in fiscally troubled local governments and
that gave emergency managers appointed to run those governments
- Michigan Treasurer Andy Dillon announced on Dec. 21, 2011,
the state would undertake a formal review of Detroit's finances.
- Moody's downgraded Detroit's credit ratings deeper into
junk on March 20, 2012, triggering the termination of interest
rate swap agreements that could cost the city an estimated $350
million. Meanwhile, work by the review team was delayed by state
court rulings over possible open meetings law violations.
- In March 2012, about half of Detroit's unions accepted pay
cuts and other concessions to save the city $68 million
annually. The Michigan Court of Appeals allowed the review team
to continue working on a potential consent agreement with the
city. An interim bond issue to raise $80 million for Detroit's
near-empty coffers was sold.
- On March 26, 2012, the review team concluded Detroit was
in a severe financial crisis, but it did not recommend an
emergency manager. The team reported that the city's more recent
financial woes were due to overspending, a reliance on debt and
the inability of elected officials to fix the problem.
- A consent agreement giving Michigan more oversight and
allowing Detroit to avoid a state takeover was approved by the
review team and in a 5-4 vote by the Detroit City Council on
April 4, 2012.
- In June 2012, Detroit's top lawyer asked a state court to
void the consent agreement on the basis that the state owed the
city money. The lawsuit postponed plans for a bond sale to
replace the March interim borrowing and raise a total of $137
million for Detroit. Bing, meanwhile, warned the city could soon
run out of cash, putting a debt service payment on $1.5 billion
of pension debt in peril. As a result, Detroit's credit ratings
were cut further into junk.
- A Michigan judge dismissed the consent agreement lawsuit
on June 13, 2012.
- An oversight board created under the consent agreement
held its first meeting on June 15, 2012.
- In July, Bing imposed 10 percent pay cuts on workers.
- On Aug. 2, 2012, a repeal of Michigan's 2011 emergency
manager law was placed on the Nov. 6 ballot. The move suspended
the law, forcing the state to rely on a weaker 1990 law to deal
- A $129.5 million bond issue for Detroit was priced on Aug.
16 through the Michigan Finance Authority. The bonds earned
investment-grade ratings due to the state's plan to send
Detroit's revenue sharing money directly to the bond trustee for
- Michigan voters on Nov. 6 repealed the state's emergency
- On Nov. 15, Bing and Michigan officials agreed on goals
and deadlines the city must meet to secure the release of $30
million of the bond proceeds.
- Five days later, the city council rejected a key goal -- a
contract with law firm Miller Canfield -- that was tied to the
release of $10 million of the proceeds. The move left the city
at risk of running out of cash by the end of 2012.
- The city council changed course and approved the Miller
Canfield contract on Dec. 11, gaining $10 million of bond
proceeds from the state. At the same time, state officials,
concerned about the slow pace of reforms, launched a new
preliminary review of Detroit's finances.
- Just days later, the review team concluded Detroit had a
serious financial problem, triggering a deeper probe that could
lead to the appointment of an emergency financial manager.
- The governor on Dec. 27 signed a new emergency manager law
to take the place of the law repealed by voters in November. The
new law, which takes effect on March 28, gives fiscally
struggling cities and school district options for dealing with
- An audit released on Jan. 3 showed Detroit's cumulative
deficit jumped to $326.6 million at the end of fiscal 2012 on
June 30, from $196.6 million in fiscal 2011.
- Bing announced on Jan. 25 that the approval of more goals
by the city council would allow Michigan to send $20 million of
the bond proceeds to the city.
- On Feb. 19 the review team concluded that Detroit faced a
fiscal emergency. The report said the city was plagued by
"operational dysfunction" and that it continues to deplete cash
reserves and faces a cash deficit of $100 million by June 30
without significant spending cuts.
- On March 1, Snyder cleared the way for a state takeover of
Detroit's finances by accepting the team's fiscal emergency
determination. He also said he had a top candidate for the job
of emergency financial manager.
- The city council appealed Snyder's decision at a March 12
- On March 14, Snyder re-confirmed the financial emergency
and appointed bankruptcy and restructuring lawyer Kevyn Orr as
Detroit's emergency financial manager.
- On May 13, Orr calls Detroit "clearly insolvent" in his
first official report on the state of the city's finances. He
said the city faced a $162 million cash shortfall because of
pension deals that outstrip its ability to pay and a $60 million
- On June 14, Orr declared the city would stop making
payments on some of its $18.5 billion debt load, effectively
placing the city in default. He promised to meet with creditors
over the ensuing 30 days. Credit ratings agencies responded with
downgrades to Detroit's credit rating.
- On July 5, Detroit filed suit against bond insurer Syncora
Guarantee, claiming the company blocked an agreement the city
had hoped to conclude with major creditors involving revenue
from the city's three casinos.
- On July 18, Detroit filed the largest municipal bankruptcy
in U.S. history.