Detroit Was Insolvent When Bankruptcy Filed, Auditor SaysSteven Church
Detroit was insolvent when it filed its record $18 billion municipal bankruptcy last year, with a deficit of $130 million, according to a financial report released by the city.
City auditor KPMG LLP verified the accuracy of the so-called comprehensive annual financial report, or CAFR, which state officials received last week after a seven-month delay. Opponents of the bankruptcy attacked the decision to seek court protection from creditors, in part by arguing that auditors had not verified the city was insolvent at the time.
“Although there is still much to be done to continue the improvement of the city of Detroit’s financial position and financial operations, the release of our 2013 CAFR represents an important milestone in our commitment to financial transparency and gives us a clean start to our reporting for fiscal year 2014,” Detroit Chief Financial Officer John Hill said in a statement today.
The city is scheduled to start a trial next month to defend a bankruptcy-exit plan that would eliminate $7.4 billion in debt by reducing pensions and health-care benefits for retired city workers and cutting what bondholders are owed.
Detroit filed for bankruptcy a year ago this month, saying decades of economic decline left it without enough revenue to provide basic services.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).