By Chris Isidore @CNNMoneyJuly 19, 2013: 11:42 AM ET
Why Detroit filed for bankruptcy
NEW YORK (CNNMoney)
Detroit is known as the Motor City, but perhaps it should be known as Blackjack City.
It's the city's three casinos that are now crucial to keeping the cash-strapped government functioning during bankruptcy.
Most of the auto industry's Michigan plants are outside of city limits, severely limiting how much tax revenue they contribute to Detroit. General Motors(GM) is the only automaker with headquarters inside of city limits, and Chrysler Group operates just one plant inside the city.
Filings made by the city in the nation's largest municipal bankruptcy late Thursday show just how dependent the city has become on the monthly infusion of cash from its casino tax. The $11 million Detroit clears from the casino tax every month is "is roughly the equivalent of 30% of the city's total available cash on hand as of June 30, 2013." It also says the casino tax could pay for the city's entire fire department, or about half of the police department.
"With 4 of the top 10 most dangerous neighborhoods in the nation, the city needs access to [the casino] money immediately to ensure public safety and keep its police on the streets and its firefighters responding to fires," said the filing.
The city gave the details about the amount and importance of the casino money because one of its creditors, insurer Syncora Holdings(SYCRF), had previously sought to stop the city from having access to the cash. The city won a court order granting it access to the casino money on July 5. But now that it is in bankruptcy court, it needs the court to OK the continued flow of casino cash to city. The filing said it has reached agreements with other large creditors, including Bank of America(BAC) unit Merrill Lynch, UBS(UBS) and its major pension funds, to allow it access to the casino cash.