The emergency manager appointed to reconfigure Detroit's bankrupt finances said Friday that the city is insolvent and the only way to bring it back into the black was to stop paying on some debt.
Kevyn Orr, appointed a few months ago to oversee the city's debt crisis, said holders should join in a "shared sacrifice" and give up their hopes for recouping all of their collective $17 billion owed by the city, The Baltimore Sun reported.
"Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the past 45 years have brought Detroit to the brink of financial and operational ruin," Mr. Orr said, The Baltimore Sun reported. "We have presented a plan that outlines a comprehensive roadmap for ensuring basic services are delivered to our citizens while aligning our obligations with the reality the city confronts."
By putting a moratorium on principal and interest owed by the city for its unsecured debt — which includes $34 million in pension certificates that was due Friday — Detroit could save cash for necessary services, Mr. Orr said.
He also announced the creation of an oversight board to make sure the city's financial reforms are continued, The Baltimore Sun reported.
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