Detroit has rebounded much more than expected by many in the year since its bankruptcy filing. NEW YORK (CNNMoney)
Last year at this time, the city filed for the nation's largest municipal bankruptcy ever. The process has moved much faster than expected.
On Monday the results of a vote by employees, retirees and creditors on whether to approve the city's reorganization plan will be announced.
"Even in a non-controversial, non-politically charged bankruptcy, getting to this stage in only a year is quite an accomplishment," said Michael Sweet, an expert in municipal bankruptcies.
Emergency Manager Kevyn Orr, who oversees the city's finances, has struck deals with city unions, pension funds and creditors to shave $7.4 billion in debt off Detroit's balance sheet.
The cuts to pension benefits could have been much worse. The current plan will reduce benefits by just 4.5%, and eliminate cost-of-living adjustments for employees and retirees from most departments. There won't be any cuts in current benefits for police and firefighters, and they'll only lose half of their cost of living adjustment.
Related: Detroit second most stressed out city
The state of Michigan, a group of charities and foundations and many leading business such as the Big Three automakers, have agreed to chip in hundreds of millions of dollars of help in a so-called "Grand Bargain" to ease the cuts for retirees. The cash would allow the city to avoid selling off the art work in the Detroit Institute of Arts, the city-owned museum, to help pay creditors.
But while retirees fared better than expected, banks and other investor groups holding the city's debt will get less than expected. Bankruptcy Judge Steven Rhodes rejected some earlier deals that would have paid them more.
Meanwhile, the city has enjoyed something an economic resurgence. Construction and housing in the downtown area are doing particularly well. Unemployment is still at 8.2%, but it's fallen much faster than the national rate.
If the cuts are approved Monday, Detroit could emerge from bankruptcy later this year.
But much of the progress could be derailed if city employees or other creditors vote down the plan. A no vote doesn't necessarily blow up the reorganization plan, but it would make it much harder for the city to emerge from bankruptcy in the fall.
First Published: July 21, 2014: 10:20 AM ET
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