ON THE seventh floor of the federal bankruptcy court on West Fort Street in Detroit there is a quiet sense of inevitability. At the end of a long hallway encased in deadening marble, America’s largest municipal bankruptcy case is being heard. Last Friday the city filed its “plan of adjustment”, the technical term for the document that says what it can pay. At the same time, Detroit outlined plans for investing more than $1.5m in the beleaguered city. A third of this money will be spent on demolishing abandoned properties.

In order to shed much of its $18 billion debt, Detroit proposes giving unsecured bondholders, including holders of general-obligation debt, 20 cents on each dollar. Pensions will be cut, too. General pensioners will receive only 66% of their monthly pension (74% if they agree quickly). Pensioners in the police and fire departments have been offered 90%, but swift approval will net them 96%. The fact that some groups are doing far better than others sets the stage for some to approve the deal. This, in theory, allows the judge to impose the deal on other creditors—a “cram down”, as it is called. In fact, if either class of pensioners rejects the deal, even a cram down cannot force it through.

Bondholders are particularly furious that they are being offered so much less than pensioners. But no one seems to care much what happens to them. On the frozen streets of Detroit this week, it was the old folk citizens felt sorry for. But they also knew there was nothing else to be done.

The restructuring plan rests on a grand bargain dreamed up by the state, foundations and the Detroit Institute of Arts (DIA). These groups will contribute $820m between them to the pension fund, but on the understanding that their cash is used to bolster the amount that pensioners, rather than other creditors, receive. At the same time the DIA would become an independent non-profit, a move intended to protect the art collection, much of which is now owned by the city. Bondholders are not impressed with this idea, either.

Rick Snyder, Michigan’s governor, will need to prise $350m from state lawmakers, who happen to be flush with unexpected extra tax revenues. But if the grand bargain fails, pensioners will get less than is being offered.

The goings-on in Detroit are being watched closely elsewhere, particularly in California, where several mid-sized cities have declared bankruptcy in recent years. They too face growing pension costs and dwindling revenues. Yet Vallejo and Stockton shied away from cutting their obligations to the state’s giant public-pension fund, even as they slashed spending on other things.

In Vallejo the result is, once again, a growing fiscal deficit and the unbearable prospect of a second bankruptcy, three years after it emerged from the first. Moody’s, a rating agency, warned recently that pension costs in Stockton and San Bernardino would become “increasingly burdensome” if the cities failed to tackle them while in bankruptcy. Detroit’s case may give San Bernardino the courage to cut its future pension liabilities. But unions in Detroit are already appealing against the decision to include pensions in the city’s bankruptcy deal. The only certain outcome is that billable lawyer-hours will show sustained and healthy future growth.