After Mammoth Lakes, Stockton, and Riverside, it appears that another municipal bankruptcy is around the corner. This time, it could be big.
The state of Michigan has appointed emergency financial manager, Kevyn Orr, to resolve the financial crisis of the city of Detroit. According to Orr, Detroit is weeks away from running out of all cash and must cut long-term debt and retiree obligations. Detroit is already 14 billion in the hole in long-term debt and is possibly looking at filing municipal bankruptcy. However, Orr has a plan to save the largest city from filing bankruptcy. Orr lays out alternatives for dealing with long-term debts, including further change in pay rates and staffing, reducing interest rates, stretching out payment schedules, and outright forgiveness of principal or refinancing.