Ren Farley contributes chapter to new Bristol Press book on "Why Detroit Matters"
Why Detroit Matters: Decline, Renewal and Hope in a Divided City, a new University of Bristol Press book edited by Brian Doucet, tells the story of Detroit by combining research, narratives, and conversations from several authors of different backgrounds. The book features a chapter by Reynolds Farley entitled "Detroit in bankruptcy: What are the lessons to be learned?"
Very few cities in the U.S. have gone bankrupt. The advantage of bankruptcy for a failing city is that only federal courts have the unambiguous power to abrogate contracts, including the great debts that cities owe to lenders such as the major banks and to their retired employees. Quite a few major cities including New York in the 1970s experienced severe financial problems. Typically, the states in which they are located tried to provide enough support to avoid a federal court bankruptcy. States are strongly motivated to do that since if a bankruptcy court frees a city from paying back the money it has borrowed, the state and other local governments in that state will likely have to pay much higher rates to borrow money. Bankruptcy court hearings and the detailed reports of Emergency Manager Kevyn Orr revealed the fundamental reason for Detroit’s financial crisis: the collapse of its tax base after the Second World War.