Politics & Government
8:38 am
Wed December 4, 2013

Lessenberry talks Detroit bankruptcy

This Week in Michigan Politics, Jack Lessenberry and Christina Shockley discuss Detroit's bankruptcy eligibility.

As many observers expected, Judge Steven Rhodes ruled yesterday that Detroit is bankrupt, and that the city can proceed with its Chapter 9 filing.  Judge Rhodes said the city did not negotiate in good faith with the creditors and it was clear the state planned the inevitable bankruptcy as soon as Kevyn Orr was named emergency manager for Detroit. Judge Rhodes also said public employee pensions can be cut as part of the restructuring. He also ruled Michigan's Emergency Manager law constitutional.

Click here to listen to the full interview

Lessenberry says now that Detroit is officially eligible for bankruptcy, Emergency Manager Orr will propose a plan. The first tentative version will be ready in January and the final plan will be presented to Judge Rhodes no later than March.

It’s unclear what will be in the plan and there are a lot more negotiations that need to take place. The biggest questions are what will happen to Detroit pensions and the Detroit Institute of Art?

“As the judge hinted, there will be pension cuts. Although it’s important to note the judge said they had to be fair. Nobody is going to lose all of their pension,” Lessenberry sais. “The $64 billion dollar question is what happens to the Detroit Institute of Art, whether there is going to be a proposal, as Orr says, to monetize the collection by selling artwork or some other way.”

How Detroit’s bankruptcy will affect Michigan

Governor Snyder says Detroit's bankruptcy filing is best for Detroit, and best for the state.

Lessenberry says Michigan is tied to its largest city.

“The bond ratings could be affected,” Lessenberry said. “Psychologically it’s much easier to lure business to any part of Michigan if your central city is seen as functioning and viable.”

Lessenberry says as we look to the future, we might see a merger of Detroit and Wayne County.

“No one is talking about that right now,” Lessenberry said. “[But] the future of Detroit is bound up with the future of Michigan and it’s very hard to imagine a competitive state economically if it does not have a viable largest city.”