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It would sound so idyllic, if only it weren’t Detroit.



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Detroit Mayor Dave Bing and the City Council oppose a state takeover in part because they would lose much of their power to the emergency manager. And bankruptcy is the last thing they want.

While that emergency manager could recommend putting the city into a Chapter 9 bankruptcy, which is reserved for cities, few experts expect that to happen.

“This is too critical and it is too important to the state to be left to the dynamic uncertainty of a Chapter 9 process,” said James Spiotto, an attorney with Chapman and Cutler in Chicago and one of the leading experts on municipal bankruptcy. “Chapter 9 is time-consuming, uncertain, expensive and unpredictable.”

Not only could it be messy for Detroit, but also for other Michigan cities whose credit worthiness might be questioned, experts said. Instead of stanching the bleeding, it might spread it.

General Motors Corp, which has its headquarters in downtown Detroit, filed for Chapter 11 bankruptcy in 2009. It received a bailout of US$49.5-billion from the U.S. government that was converted to an ownership stake once GM emerged from bankruptcy.

Detroit’s problems, including US$14-billion in long-term liabilities, cry out for a radical fix. But few expect the federal government to come to the city’s aid.

Its population has plummeted to 700,000 from 1.8 million and the departing residents took with them the city’s tax base. They left behind a glut of foreclosed homes, high crime and a city struggling to provide basic services and meet pension obligations.