On Thursday, the city of Detroit filed for bankruptcy protection after being saddled with debts totaling more than $18.5 billion.
That makes Detroit the largest city in the United States ever to file for bankruptcy — the previous record was held by Stockton, California, which was half the size and owed $26 million. The previous debt record, meanwhile, went to Jefferson County, Alabama, which owed $4 billion when it filed for bankruptcy in 2011.
Governing Magazine has a useful interactive map showing all of the cities, towns, countries, utilities, and other municipalities that have filed for bankruptcy since 2010. There are 36 in all:
All told, 8 cities and towns have filed for bankruptcy since 2010 — and two of the filings were rejected:
-- San Bernardino, Calif.
-- Mammoth Lakes, Calf. (Dismissed)
-- Stockton, Calif.
-- Jefferson County, Ala.
-- Harrisburg, Pa. (Dismissed)
-- Central Falls, R.I.
-- Boise County, Idaho (Dismissed)
An additional 28 utilities, water districts, hospital authorities, and other municipal units have also gone bankrupt in the wake of the financial crisis.
But even if Detroit's not alone, the sheer size of the city makes this case unprecedented. Over at Reuters, Cate Long explains:
Prior cases in Central Falls, Rhode Island and Vallejo, California treated bondholders carefully. They still needed to maintain access to the the bond markets for short and long-term funding. But the bankruptcy of Jefferson County, Alabama, where bondholders are taking between 20 and 85 percent haircuts, has changed the rules for municipal bondholders. Now the blood has begun to flow. ...
The process of restructuring [Detroit's] liabilities began with the bankruptcy filing today. It may last up to two years and involve a lot of litigation. New precedents about the treatment of bondholders, swaps counterparties, employees and pensioners will likely be developed. Conflicts will arise between the Michigan Constitution and federal bankruptcy law. The fights and protests may be vicious.