Emergency Manager Kevyn Orr’s plan to suspend payments on $2 billion of Detroit’s debt threatens a basic tenet of the $3.7 trillion municipal market: that states and cities will raise taxes as high as needed to avoid default.
Detroit is suspending payments on $2 billion of unsecured debt, marketing parking garages and telling retirees to rely on President Barack Obama’s health-care law to avoid a record municipal bankruptcy.
Mobile phones and iPads will be banned and more than 100 creditors and union leaders will have to show photo identification to hear Detroit emergency manager Kevyn Orr demand concessions to erase a $386 million deficit.
Whether Detroit careens into the largest U.S. municipal bankruptcy depends on emergency manager Kevyn Orr’s convincing creditors during the next two months that his plan will revive a city plagued by deficits, crime and strained services.
Florida’s business community, a bastion of conservatism on most matters, was among those pushing hardest for a state measure that would have adopted a major part of President Barack Obama’s federal health-care law.
Detroit’s emergency financial manager may decide within six weeks if he can avert bankruptcy. Bond investors are buying the Michigan city’s insured debt at a discount in a bet they’ll get paid regardless of the outcome.