Detroit's emergency manager argued Friday that the decision to file for bankruptcy will in the end help the city's beleaguered residents who "don't deserve" the poor emergency response times and blight that have become "endemic" in the once-thriving city.
In a brief press conference held a day after city managers filed for what would be the largest municipal bankruptcy in U.S. history, Michigan Gov. Rick Snyder said some Detroit creditors aren't sure they'll ever be paid.
But Emergency Financial Manager Kevyn Orr said that not only would the bankruptcy help stabilize the city in the long-run, but "it gives us breathing room" in the short-term.
He said the cash-flow that could result from the filing will help the city concentrate on "health, safety and welfare." He cited a roughly 55-minute response time as evidence of how city services have eroded over the years -- as the taxpayer base fled the city and its resources became increasingly strained.
City workers and retirement funds had sued to prevent Snyder from approving a bankruptcy request. That litigation will be suspended.
Orr blamed the lawsuits in part for the bankruptcy filing this week. He said the city was being sued on "an almost weekly basis," which he had asked not happen, suggesting the lawsuits helped forced his hand in filing for bankruptcy. He said the upside is the process would help bring "all parties" together including those representing the thousands of retired workers owed pension payments.
Orr has said the city of about 700,000 people will continue to pay its bills and employees.
Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall, and made the filing Thursday in federal bankruptcy court.
"Only one feasible path offers a way out," Snyder said in a letter to Orr and state Treasurer Andy Dillon approving the bankruptcy.
Orr was unable to convince a host of creditors, including the city's union and pension boards, to take pennies on the dollar to help facilitate the city's massive financial restructuring.
Some creditors were asked to take about 10 cents on the dollar of what the city owed them. Underfunded pension claims would have received less than 10 cents on the dollar under that plan.
A team of financial experts put together by Orr said that proposal was Detroit's one shot to permanently fix its fiscal problems.
The filing leads to a 30 to 90 day period that will determine whether or not the city of Detroit is eligible for Chapter 9 protection, and define the number of claimants who may compete for Detroit's limited settlement resources.
The Associated Press contributed to this report.