Another Major City in Michigan on the Verge of Bankruptcy - Government News | Financial Buzz

Another Major City in Michigan on the Verge of Bankruptcy

Flint, General Motors, Bankruptcy, Finances, DetroitA second major city in Michigan may file for bankruptcy. Flint, Michigan may follow the steps neighboring city Detroit who filed for bankruptcy last year.

Flint once had 200,000 residents has seen a dramatic drop in population over the past several decades. The birthplace of General Motors (NYSE: GM) has lost many factory jobs and abandonment of properties.

Last year, Detroit became the largest municipality in the U.S to enter Chapter 9 bankruptcy.  Flint is about an hour away and if the judge rules against the city’s effort to cut its retiree health care benefits, the city is expected to file for bankruptcy.  Flint will join dozens of cities and counties that have sought help from courts to modify their retiree benefit system.

“If we don’t get any relief in the courts … we are headed over the same cliff as Detroit,” said Darnell Earley, the emergency manager of Flint’s finances. “We can’t even sustain the budget we have if we have to put more money into health care for city workers.”

Before Detroit, the largest government bankruptcy was in Jefferson County in Alabama. The county has reorganized its debt of $4 billion. Several California counties like Stockton, San Bernardino and Mammoth Lakes have filed for bankruptcy.

Detroit and Flint were once booming cities filled with auto jobs where General Motor employed about 80,000 in the 1970’s. Today, the company employs fewer than 8,000 and Flint’s population has fallen below 100,000. The state’s unemployment rate is 7.3%.

Officials say the city can no longer support the generous public pensions and benefits awarded to retirees. The budget deficit is about $12.9 million and the city will need to come up with $5 million this year.

Flint resident, Leon Noack, who retired as an assistant fire chief receives $2,200 a month from his pension. “I feel sorry for the city that they’re in this bind, don’t get me wrong. I understand they need help. But the way they’re going about it is just not right,” said Noack.

For now, Flint’s only hope to avoid bankruptcy is for the court to vote in favor the city modifying the health care and benefit plans for Flint retirees.

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