Detroit Water Cuts Resume

After 37-day Moratorium, Detroit's Water Department Begins Shutting off Water to Property Owners Late in Paying Their Utility Bills

Detroit's emergency manager, acted on the remarkably broad authorities afforded him by an eight-month-old state law and filed a petition to launch the largest municipal bankruptcy in U.S. history. Orr's intent, he said, was to reduce the beleaguered city's operating costs, reduce the cost of servicing the city's debt, and set Detroit on a fresh course to redevelopment and prosperity.

During a news conference that evening, Detroit's elected one-term Mayor Dave Bing stood meekly by Orr's side and offered his reluctant support: "This is very difficult for all of us," Bing said. "But if it's going to make services better off, then this is a new start for us."

In the more than 13 months since the bankruptcy petition was filed it's become steadily clearer who's better off in Detroit and who is not. The owners of small and medium-sized businesses that have invoices still to be paid by Detroit are not. They could receive 30 cents on the dollar or less on the outstanding balances.

A Shrinking City Under Emergency Rule

Detroit's bankruptcy trial is scheduled to start Tuesday, September 2, in U.S. Bankruptcy Judge Steven Rhodes' courtroom at the U.S. District Bankruptcy Court for the Eastern District of Michigan. Over the next eight weeks or so, the trial proceedings are expected to reveal just how much "better off" the big banks financing the city's new debt and financial obligations — as well the lawyers, bankers, accountants, and consultants involved in the deal-making — will be from rearranging Detroit's fiscal operations.

An examination by Circle of Blue of thereports, exhibits, studies, and court orders filed with the federal bankruptcy courtyields a disturbing and unassailable conclusion: While unionized employees lost jobs and substantial portions of their pensions and benefits, andthousands of Detroit's poorest residents are severed from water supplies and sewer services, the nation's biggest banks are making $6 billion to $7 billion in new bonds available to refinance city debts, a move that should reduce interest payments.

Many less people in Detroit are being asked to pay more towards those costs. Detroit has lost hundreds of thousands of jobs and an average of 20,000 residents annually have departed since 1954, when the city's population peaked. That has left under 700,000 residents, and one-third as many property and business owners, to pay water and sewer expenses designed for a city that once had nearly two million residents. Before a rate increase in July the cost of water and sewer averaged around $65 a month for most households, according to the water department, but water prices are rising faster than most cities. The average overdue water and sewer bill is under $540, the department said.

Source: Circle of Blue

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