municipal bankruptcy

Steve Carmody / Michigan Radio

LANSING, Mich. (AP) - Mediators in Detroit's federal bankruptcy case say that building trade unions have agreed to contribute to a fund to cover retirees' benefits.

Some legislative Republicans have made union contributions to the pensions a condition for state aid, designed to protect the Detroit Institute of Arts' collection from sale to cover the costs.

A state House committee is to vote Tuesday spending $195 million to help Detroit emerge from bankruptcy.

Governor Snyder hopes the State House will make progress toward approving the ‘Grand Bargain’ this week.

Critics complain it’s not fair for the rest of the state to pay for Detroit’s financial missteps. Supporters say restoring Detroit to financial health is important to all of Michigan.Credit Steve Carmody / Michigan RadioEdit | Remove

Steve Carmody/Michigan Radio

The judge’s decision to let the city of Detroit pursue Chapter Nine bankruptcy protection could have an effect on the municipal bond market.

Municipal bonds have long been viewed as one of the safest investments out there. But bond holders may be among the biggest losers in Detroit’s bankruptcy.

Bob Jagendorf / Flickr

Ever since Detroit’s became the biggest in American history to seek bankruptcy protection, the term “death spiral” has been in the spotlight.

The spiral often begins with promises made to municipal workers. Pensions and health coverage are becoming too much for many cities and states to bear. But the law tells mayors and governors that those pension plans need to remain intact.

As pension costs mount, they try raising taxes, or turning to the municipal bond market. And when those doors are slammed shut, what happens? Essential services get cut, pink slips start flying, and businesses and homeowners get out of town, leaving behind a smaller and poorer population even less able to cover a city’s soaring costs.

The judge in Detroit’s bankruptcy case has denied a bid to keep some details of a controversial loan agreement secret.

Judge Steven Rhodes ruled Thursday that the city must disclose all the terms of a proposed loan from the British financial giant Barclays. That loan deal is as complex as it is controversial.

The Detroit Institute of Arts
Flickr

If anything’s clear coming from Detroit’s bankruptcy case it is this: the city needs new solutions.

Daniel Howes, Detroit News business columnist, wrote his column today on a proposal from Chief U.S. District Judge Gerald Rosen. Rosen is proposing a new private fund that could have a major impact on the future of the Detroit Institute of Arts, the city’s retired workers and bankruptcy proceedings.

Listen to the full interview above.

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Detroit officials and some of the city’s creditors will sit down for their first official mediation session Tuesday.

The mediation was ordered by Judge Steven Rhodes, who’s in charge of Detroit’s Chapter 9 bankruptcy case. Rhodes has appointed chief federal district court judge Gerald Rosen as mediator.

user aMichiganMom / Flickr

Tuesday saw a flood of court filings from Detroit's creditors.

Midnight was the deadline for creditors to file objections to Detroit's request for Chapter 9 municipal bankruptcy protection.

About 100 unions, pensioners, and individuals filed objections with the court.

Oakland County is going ahead with a planned bond sale next week.

And according to county officials, they won’t be penalized for Detroit’s recent bankruptcy filing.

Oakland County has the highest bond rating possible—AAA. And officials say that’s allowed them to sell bonds at a reasonable interest rate, despite Detroit’s recent bankruptcy.

From the Detroit Free Press:

Steve Carmody/Michigan Radio

With all the talk about Detroit’s path into bankruptcy court, some people have been asking why hasn’t Flint gone the same route?

Like Detroit, Flint’s city finances have been a mess for a long time.

Governor Snyder not only appointed an emergency manager to run Flint, he did so more than a year before he appointed one in Detroit.

JasonParis / Flickr

Detroit's bankruptcy filing has raised a lot of questions, especially for people who live in the city. It's unlikely the day-to-day lives of Detroiters will change very much under a bankruptcy.

Lyke Thompson is the director of Wayne State University's Center for Urban Studies. He says Detroit's city services are already pretty bad, and that there will be few immediate differences for city residents, but things could get worse before they improve.

Peter Martorano / Flickr

What will bankruptcy mean for Detroit?

There are certainly a lot of unknowns as the city navigates through the largest municipal bankruptcy filing in U.S. history, but we can look to other municipalities that have gone through this process.

Here’s a brief outline of two other major municipal bankruptcy cases in the U.S.:

1) Jefferson County, Alabama

 

Population: 658,931

Filed for Bankruptcy: 2011

detroit1701.org

The day before Detroit declared bankruptcy, I was driving with Jack Dempsey, president of the Michigan Historical Commission, along a weed-choked Detroit street, next to a forbidding fence.

“There it is,” he said, pointing to a battered old two-story wood frame house. The windows were boarded up; one of the slats was falling off the sides. “Know what that is?“ he asked. I did. It was the home of Ulysses S. Grant, the eighteenth President of the United States, the general who won the Civil War for the North.

Grant was the only president ever to live in Detroit, back when he was a young army officer, spending his time racing horses up and down Fort Street. Anywhere else, this house would be a tourist attraction and a shrine, but instead, Grant’s house sits there, decaying, as the historical commission scrambles to try to figure how to move it before someone firebombs it.

User: Brother O'Mara / Flickr

Detroit files for bankruptcy

Governor Rick Snyder has approved Detroit’s bankruptcy filing.  It is now the largest municipal bankruptcy case in U.S. History.  Michigan Public Radio’s Rick Pluta reports that “the governor says bankruptcy will ultimately offer creditors some assurances on how much they will be paid. A federal judge still has to approve the request.”

University of Michigan grants in-state tuition to undocumented immigrants

Yesterday, the University of Michigan Board of Regents approved the provision of in-state tuition to undocumented immigrants.  Michigan Radio’s Tracy Samilton reports that “undocumented students will have to show they attended middle school and high school in Michigan to get the lower tuition rate.”  This comes after two years of lobbying from activists and undocumented students.

Last chance for Inkster and Buena Vista school districts

The Inkster and Buena Vista school districts have until Monday evening to prove that they can finance the 2013-2014 school year.  If funds cannot be found, the districts will then be closed.  Michigan Public Radio’s Rick Pluta reports that “if Inkster and Buena Vista are shut down, their students would go to other schools in the intermediate school district.”

State of Michigan / Michigan.gov

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.

Lester Graham / Michigan Radio

Each week, Michigan Radio's political analyst Jack Lessenberry, and weekend host Rina Miller look back on the big news events in Michigan. You can listen to their discussion above. Below is a short summary.

Lawsuit over Taylor School District contract tossed out

Sarah Hulett / Michigan Radio

 Detroit emergency manager Kevyn Orr has cancelled a planned bus tour for the city’s Wall Street creditors.

Some of those creditors are in Detroit this week to meet with Orr, and to take a look at some of the city’s assets.

The planned tour would have put the creditors on a city bus, and taken them for some pretty grim sightseeing.

It was meant to convince them that the city’s condition is dire, and bondholders should big accept losses on their Detroit debt.

State of Michigan / Michigan.gov

Detroit’s emergency manager Kevyn Orr sits down with the city’s major creditors Friday.

The meeting sets up negotiations that could help Detroit avoid filing for bankruptcy—or lay the groundwork for it.

Orr will gather all the city’s big creditors—unions, retirees, and banks—to pitch his plan.

They’ll all be asked to take some major losses to help Detroit shed some of its crippling debt load, estimated at a least $15 billion.

Detroit emergency manager Kevyn Orr didn’t share much new information at his first public meeting Monday night—but he did set the stage for an upcoming meeting with the city’s creditors.

At his first public meeting—required by the emergency manager law that empowers him--Orr told a story we already know: Detroit hasn’t been paying contractors, making pension payments, and has only survived by borrowing billions.

DIA

Ever since Detroit emergency manager Kevyn Orr mentioned maaaaybe putting DIA gems on the table to appease creditors, the you-know-what has hit the fan.

Selling art to pay off debt is a big museum no-no, especially for one as well-regarded as the Detroit Institute of Arts.

Why, museum supporters ask, would any rich donor ever want to give money or art to the DIA again?

What’s to guarantee their gifts won’t just be auctioned off the next time the city needs cash?

And further, if the DIA is blacklisted and other cultural icons sold off, how is a post-bankruptcy Detroit supposed to become a sustainable, cultural, people-drawing city?

It appears that officials might be laying the groundwork for a so-called “managed bankruptcy” in Detroit—though it’s something they hope won’t actually happen.

A process for going through Chapter 9 municipal bankruptcy is laid out in the state’s new emergency manager law that kicks in next month. And it could happen even if Governor Snyder appoints an emergency manager for Detroit.

Both state and city officials used to say that bankruptcy was completely off the table for Detroit.