City of Detroit files bankruptcy, are taxpayers on the hook?

I’d tag this in the 2016 category depending on how the current administration responds. Bailing out the auto industry is still having repercussions both economically and politically. What about bailing out a city?

Report from USAToday:

DETROIT — While Detroit emergency manager Kevyn Orr on Friday was offering short-term reassurances to thousands of city pensioners whose benefits are in jeopardy, his lawyers were waging a whirlwind legal battle over the constitutionality of the bankruptcy filing that could land both sides before a federal judge early next week.

On Friday, Michigan Attorney General Bill Schuette said he will appeal an Ingham County judge’s ruling that Detroit’s bankruptcy filing must be withdrawn because it violates the Michigan Constitution and state law.

However, the order from Ingham County Circuit Judge Rosemarie Aquilina ultimately could have little effect because the bankruptcy case already was filed in federal court, and federal law generally trumps state law. The city filed a motion requesting to include the state as a party in the bankruptcy code’s provisions that put on hold all lawsuits against the city, a clear attempt to fight the Ingham County ruling by preventing the state from being sued in similar fashion. The city is asking U.S. District Judge Steven Rhodes to hold a hearing on Tuesday, or earlier, to decide this and other matters.

Saving the City of Detroit was a central part of the argument used by the Obama administration to lobby for bailing out General Motors, Ford and Chrysler. Looks like Detroit was too far gone at that point to be saved just by keeping some of the remaining businesses afloat.