Detroit financial crisis

Politics & Government
3:31 pm
Tue December 3, 2013

Judge rules Detroit is eligible for bankruptcy, city can protect itself under Chapter 9

John Meiu Detroit Legal News Publishing LLC

U.S. Bankruptcy Judge Steven Rhodes ruled this morning that the city of Detroit is allowed to protect itself from its creditors under Chapter 9 municipal bankruptcy protection. In his ruling, Rhodes said pensions can be treated like any other debt and are subject to potential cuts. We've been following the news as it unfolds today.

Update 3:31 p.m.

Michigan Attorney General Bill Schuette issued a statement today saying he supported the bankruptcy ruling, but was "deeply disappointed" with Rhodes' ruling that pensions are eligible for cuts.

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Detroit bankruptcy
1:03 pm
Wed November 13, 2013

Judge will soon decide whether Detroit will get bankruptcy protection

The next steps for Detroit? This man will soon decide. Judge Steven Rhodes.
John Meiu Detroit Legal News Publishing LLC

Today is the last day U.S. Bankruptcy Judge Steven Rhodes will accept documents from all sides of the Detroit bankruptcy case.

Rhodes will then look at all the evidence and decide whether the city of Detroit can reorganize itself under Chapter 9 bankruptcy laws. 

Rhodes has heard a lot. The city's future path will be up to him.

His decision will be based upon a) whether the city truly has no other options to pay its debts, a b) whether the city negotiated in good faith with its creditors prior to saying bankruptcy was the only way.

No one seems to be arguing that the city has a viable way to pay its debts. And Daniel Howes of the Detroit News argues that defining "good faith" negotiations in exceedingly difficult in this case.

That's because Detroit owes money to nearly 100,000 creditors.

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2:44 pm
Fri November 8, 2013

Merging Detroit and Wayne County is the only long-term strategy that makes sense

Lessenberry commentary for 11/8/2013.

Well, it was quite a week for our state’s largest city. Voters elected a white mayor for the first time since 1969.

Had you gone to Lloyds of London 10 years ago and bet that within a decade, America would have a black president and Detroit a white mayor, today you would be very rich indeed.

But in the city Cadillac founded, attorneys today will offer closing arguments in a trial to determine whether the city will be allowed to file for bankruptcy. While everything in Federal Judge Steven Rhodes’ courtroom is by the book, there is an element of Kabuki-theater unreality about it all.

Nobody really believes the application will be denied. If it were, creditors would tear what remains of Detroit apart with the efficiency of a pack of wolves with a lamb.

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Politics & Government
11:53 am
Wed October 23, 2013

Can Detroit really get bankruptcy protection? Hearing starts today, Snyder to testify Monday

Judge Rosen will decide whether the city can protect itself from creditors under bankruptcy protection.
Detroit Legal News

Detroit is NOT in bankruptcy. Not yet, anyway.

That's what the bankruptcy hearing, which started today, is all about.

The federal bankruptcy judge will decide whether the city is allowed to protect itself from close to 100,000 creditors under Chapter 9 bankruptcy laws.

We found out this morning that Michigan Gov. Rick Snyder, the man who ultimately signed off on Detroit's bankruptcy filing, will testify in the Detroit bankruptcy trial on Monday.

Unions had served Snyder with a subpoena, but his live testimony appeared to be an unsettled issue earlier this week.

Gov. Snyder's lawyer argued that the Snyder's recent three-hour deposition should be enough.

But now his counsel says the governor wants to cooperate and will be available Monday afternoon.

Unions and pension funds want to question Snyder about approving Detroit's bankruptcy filing in July as well as other issues related to the case.

They will try to prove to the bankruptcy judge that Gov. Snyder and Detroit's emergency manager Kevyn Orr had bankruptcy in mind all along - that they did not negotiate in good faith with the creditors ahead of time.

Michigan Radio's Sarah Cwiek is live tweeting from today's hearing. Lawyers for the city have already argued in favor of bankruptcy this morning. Now it's time for those opposed to bankruptcy to argue. Here's how Cwiek sums up what their arguments will be:



5:47 pm
Thu October 3, 2013

Detroit's EM hints at how he might use DIA art to help city


Detroit Emergency Manager Kevyn Orr has sent out the strongest hint yet that prized pieces in the DIA collection are on the table as a way to put money into the city coffers.

Without offering many details, Orr told the Detroit Economic Club today that there are ways for the DIA to make money from its artwork that might not involve outright sales, but perhaps would involve long-term leases.

Orr was clear -- he said he must consider ways to use the museum's treasures to help the bankrupt city.

And, earlier this week, another one of the city's "jewels" was back in the spotlight.

The State and Mayor Dave Bing announced an agreement under which the State DNR would run Belle Isle as Michigan's 102nd State Park.

Detroit News business columnist Daniel Howes joined us to talk about all this.

Listen to the interview above.

Politics & Government
10:52 am
Mon September 16, 2013

Plans move ahead to fix Detroit streetlights

DETROIT (AP) — Crews will begin a block-by-block review of streetlights in two Detroit neighborhoods this week as part of a three-year plan to overhaul the city's decrepit lighting system.

Fewer than half of Detroit's 88,000 streetlights are believed to be working, and Public Lighting Authority workers will inspect each light in areas on the city's east and west sides to map out which aren't working and to determine the cause of each malfunction.

"We will use the information we gather to design a specific plan to relight both of these areas as a prelude to moving out into the rest of the city to completely restore street lighting," the authority's Executive Director Odis Jones said in a statement.

Workers will be wearing yellow vests with the Public Lighting Authority's logo and will be driving vehicles with PLA signs on the side.

After approval from City Council, the Public Lighting Authority was set up earlier this year to design and implement the plan to improve Detroit's public lighting system. Gov. Rick Snyder signed legislation last year to allow lighting authorities in some cities.

Politics & Government
11:20 am
Fri September 13, 2013

Detroit Mayor Bing feeling sidelined, has advice for next mayor

Detroit Mayor Dave Bing, Gov. Rick Snyder, and Detroit's emergency manager Kevyn Orr. Michigan Government

Detroit Mayor Dave Bing will finish his term at the end of the year, and according to Matt Helms of the Detroit Free Press, Bing is going out feeling frustrated.

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Politics & Government
12:49 pm
Wed August 28, 2013

Orr says Detroit's parking system losing money, considering sale

Sarah Cwiek Michigan Radio

The Detroit News reports that Kevyn Orr is considering a sale of the city's parking system.

Michigan Radio's Sarah Cwiek is looking into this story further and will have more later.

Parking systems can be a source of revenue for a city, but according to the News, Orr says the system is losing money:

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Politics & Government
4:42 pm
Thu August 15, 2013

First public debt is issued in Michigan since Detroit bankruptcy

State lawmakers have passed bills allowing the city to keep taxing at certain rates. The legislation awaits Governor Snyder's approval.
Bob Jagendorf Flickr

People are willing to loan money to Michigan public entities again: that's according to Brian O'Connor, the finance editor at the Detroit News.

O'Connor writes that when Ypsilanti Community Schools and the state sold bonds yesterday, it marked the "first time since Detroit filed for bankruptcy" that public debt was issued in Michigan. 

From The Detroit News:

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Politics & Government
12:50 pm
Tue August 13, 2013

Consultant fees charged to the city of Detroit scrutinized

From the cover of the Jones Day proposal to be the city's 'restructuring counsel.'
Jones Day

Bills being charged to the city of Detroit in its restructuring are under the spotlight.

Last month, legal fees charged by Kevyn Orr's former law firm, Jones Day, were highlighted in a piece by AM Law Daily's Sara Randazzo.

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Politics & Government
12:42 pm
Mon August 12, 2013

Economist says banks should be at the back of the line in Detroit bankruptcy

Nobel Prize winning economist Joseph Stiglitz wrote about Detroit's bankruptcy filing in yesterday's New York Times.

In his opinion piece, The Wrong Lessons from Detroit's Bankruptcy, Stiglitz writes that it is "extremely important" to understand what happened in Detroit.

Detroit’s travails arise in part from a distinctive aspect of America’s divided economy and society ... our country is becoming vastly more economically segregated, which can be even more pernicious than being racially segregated. Detroit is the example par excellence of the seclusion of affluent (and mostly white) elites in suburban enclaves. There is a rationale for battening down the hatches: the rich thus ensure that they don’t have to pay any share of the local public goods and services of their less well-off neighbors, and that their children don’t have to mix with those of lower socioeconomic status.

Stiglietz says the question in front of Detroit now is how the city gets through the bankruptcy process, and that "ensuring that bankruptcy proceeds in a way that is good for Detroit will require vigilance."

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3:00 pm
Tue August 6, 2013

Bloomberg says 'avoiding the hard choices is how Detroit went bankrupt'

Lead in text: 
New York Mayor Michael Bloomberg talked about Detroit once being an "economic powerhouse." He said there are some important lessons in Detroit's bankruptcy filing.
New York Mayor Michael Bloomberg said every U.S. city needs to heed the lesson of Detroit's recent bankruptcy filing and urged cities to diversify their economies. 'Avoiding the hard choices is how Detroit went bankrupt. And it's the road to ruin for any city,' Bloomberg said in a speech today in New York.
9:16 am
Sat July 20, 2013

Detroit's pension fund was well-funded, but suddenly it wasn't

Lead in text: 
Current methods for calculating the health of pension funds might be outdated. This post by Mary Williams Walsh explains why.
Until mid-June, there was one ray of hope in Detroit's gathering storm: For all the city's problems, its pension fund was in pretty good shape. If the city went under, its thousands of retired clerks, police officers, bus drivers and other workers would still be safe. Then came bad news.
7:06 pm
Fri July 19, 2013

7 questions and answers about Detroit's bankruptcy

Credit Patrick Gibson / Flickr

Detroit filed for Chapter 9 federal bankruptcy protection yesterday.

The federal courts have never seen a municipal bankruptcy filing of this size, so there are a lot of questions out there.

Earlier today, we asked our Facebook followers, "What questions do you have about Detroit's bankruptcy?" 

We've been working hard to answer as many of them as possible. Here's what we have so far, but keep checking back as we gather more information for you.

1. Why now?

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Politics & Government
3:08 pm
Fri July 19, 2013

City of Detroit files for federal bankruptcy protection

Michigan Gov. Snyder (left) and Detroit Emergency Manager Kevyn Orr discuss the bankruptcy filing with the press Friday morning.

The city of Detroit has filed for Chapter 9 federal bankruptcy protection making it the largest city in U.S. history to declare bankruptcy. We are updating this post as we learn more information. To see how the story unfolded scroll down and read up.

Final update on this post - 3:08 p.m.

And here we go - the beginning of a long line of likely court battles after the city of Detroit attempts to move through federal bankruptcy protection.

Today, Ingham County judge Rosemary Aquilina issued orders saying Detroit's bankruptcy filing violates the state constitution. More from the Detroit Free Press:

In a spate of orders today arising from three separate lawsuits, Aquilina said Gov. Rick Snyder and Detroit emergency manager Kevyn Orr must take no further actions that threaten to diminish the pension benefits of City of Detroit retirees.

State Attorney General Bill Schuette moved quickly and said he will appeal the judge's decision. He plans to ask the Michigan Court of Appeals to grant a stay of that order.

11:22 a.m.

Detroit Emergency Manager Kevyn Orr and Gov. Snyder held a press conference this morning to discuss the Chapter 9 bankruptcy filing for Detroit with the press. They both stressed that for the people of Detroit, "it's business as usual."

"Going forward...we will pay our bills," Orr said. He said priority will be given to those expenses relating to health, safety, and welfare.

Orr said that "bankruptcy is a tool in our toolbox" and the process gives him a chance to implement a plan that he laid out on June 14

"It gives us breathing room," Orr said. "We were getting sued on a weekly basis." Two Detroit pension boards filed suit to try to stop federal bankruptcy proceedings. The action prompted Orr and Snyder to push up the timing of the filing.

Orr told reporters that he asked for a "consensual process" with creditors and interested parties, "but that didn't happen."

Orr was asked "what shocked him most?" when he first opened Detroit's books. Orr replied it was the normalcy of the practice of continual borrowing in the face of mounting debt in Detroit that struck him most.

"What shocked me wasn't the numbers," he said. "What shocked me was the tolerance for this behavior for decades...I wish there had been a lot more outrage over the past ten to twenty years."

Orr referred to his short tenure as emergency manager to deal with Detroit's debt problem. "We're dealing with 60 years of deferred maintenance in 18 months. I can't afford to spend time running in place to fix the problems I'm here to address," he said.

Orr mentioned a list of mounting problems in Detroit as reason to take drastic action - children walking home in the dark after school because street lights don't work, "40 year-old trees" growing out of dilapidated buildings, and slow police response times.

"I recognize [Chapter 9 bankruptcy] is a lever, but we are trying hard to be fair."

Orr said they are looking for an entity to represent retirees in the bankruptcy proceedings, something he said some unions were unwilling to do.

Gov. Snyder became animated when talking about the Chapter 9 filing.

"Now is our opportunity to stop 60 years of decline. This is fundamental... how long has this ...we are doing something. This is forum. This is the place to do it in. This is the place to address the debt question...we will come out with a stronger, better Detroit." Gov. Snyder said. Snyder said not only do the citizens of Detroit deserve an improved city, but the people of Michigan deserve it as well.

9:30 a.m.

At 10:00 a.m., Gov. Snyder and Detroit Emergency Manager Kevyn Orr will hold a press conference on the Detroit bankruptcy filing.

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Politics & Government
11:25 am
Thu July 18, 2013

Detroit pension funds sue city's emergency manager, governor in attempt to block bankruptcy

Emergency Manager Kevyn Orr
State of Michigan

Two Detroit pension funds have sued the city’s emergency manager, Kevyn Orr, and Governor Rick Snyder in an attempt to block the Motor City from filing for bankruptcy.

The General Retirement System and the Police and Fire Retirement System of the City of Detroit filed the lawsuit yesterday, Bloomberg’s Margaret Cronin Fisk reported. The state’s constitution offers protection of public retirees’ rights, and the petitioners of the lawsuit are claiming that a Detroit bankruptcy would violate those rights.

Orr’s office refused to comment on the lawsuit.

Orr hasn’t commented on which pension funds would be cut, and to what degree, but he has vowed to make “significant cuts” to pension payments.

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Politics & Government
6:53 am
Wed July 10, 2013

In this morning's news: Jenkins replaces Pugh, income tax bill, Orr meets with creditors

User: Brother O'Mara flickr

Saunteel Jenkins replaces Charles Pugh as Detroit City Council President

"Saunteel Jenkins is the new President of the Detroit City Council. The Council voted on new leadership after it lost its two former top officials. Jenkins replaces Charles Pugh, who has vanished from the public eye amidst allegations of a questionable relationship with a teenager," Michigan Radio's Sarah Cwiek reports.

Proposed legislation would let voters eliminate income tax

Republican state Representative Bob Genetski is sponsoring legislation that would let voters decide whether to get rid of the state's income tax.

"He supports raising the state’s sale’s tax to make up for the lost revenue. Former director of the state House Fiscal Agency Mitch Bean says the plan would leave an $8.5 billion dollar hole in next year’s state budget," Jake Neher reports.

Orr cancels bus tour with creditors

Detroit emergency manager Kevyn Orr has canceled a planned bus tour meant to convince Wall Street creditors that the city's condition is dire and they should accept big losses on its debt.

"Orr says the tour could be rescheduled. But it increasingly seems that his negotiations with creditors are hitting a wall. City Council member Ken Cockrel echoes what many think--that resistance from creditors is speeding up Detroit’s timeline for a possible bankruptcy filing," Michigan Radio's Sarah Cwiek reports.

2:19 pm
Fri June 21, 2013

Detroit's emergency manager takes on pension funds

Lead in text: 
Detroit's pension boards have been under investigation by the SEC and federal prosecutors. Now Kevyn Orr is ordering his own investigation.
In 2009, a Detroit Free Press investigation of Detroit's two public pensions found a history of failed investments, lavish worldwide travels by the trustees who ran the funds, and few ethics rules. The newspaper reported in 2011 that the funds had lost $470 million in risky investments since 2008.
Politics & Government
3:19 pm
Fri June 14, 2013

Orr's plan to remake Detroit

The city of Detroit.

When Kevyn Orr was announced as Detroit's emergency manager, he said he took the job because of the challenge - the "Olympics of restructuring" he called it.

Today, Orr unveiled his plan for that restructuring at a two hour meeting with people representing banks, insurers, pension funds, unions, and other companies holding Detroit's debt.

You can read his 128 page "Proposal for Creditors" here.

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Politics & Government
12:45 pm
Fri June 14, 2013

Orr's restructuring plan released, historic meeting with Detroit's creditors is underway

Orr arriving this morning at the meeting.
Matt Helms Twitter

Update 12:45

The meeting has ended. We'll have updates later today on Orr's plan and reaction to it from other stakeholders.

The Detroit Free Press' Matt Helms tweeted a shot of Orr talking to the media after the meeting:

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