Detroit bankruptcy

Detroit skyline
user JSFauxtaugraphy / Flickr

Detroit's historic and unprecedented bankruptcy came together last Friday for approval from Judge Steven Rhodes.

The Detroit News recently provided in-depth coverage from business columnist Daniel Howes and reporters Chad Livengood and David Shepardson.

We talked to Howes about how the case was completed in 15 months, about the key players, and about what must be done to avoid repeating mistakes.

You can listen to our conversation with Daniel Howes below:  

The group tasked with making sure post-bankruptcy Detroit stays solvent met for the first time Wednesday.

The nine-member Detroit financial review commission will serve as the last word on the city’s financial decisions for at least three years.

The panel will review and approve all city budgets, major contracts and collective bargaining agreements during that “control period.”

Marijuana plant.
USFWS

This Week in Michigan Politics, Emily Fox and Jack Lessenberry discuss whether the legislature will be able to come up with a plan to fix Michigan's roads before the end of the year, a challenge to a Grand Rapids law decriminalizing marijuana, and what’s next on Detroit’s road to recovery.


Detroit's riverfront.
Ian Freimuth / Flickr

Matt Helms at the Detroit Free Press reports that Mayor Mike Duggan has some sticker shock over the cost of Detroit’s bankruptcy.

Helms reports that Duggan “is alarmed” that the city will have to pay lawyers and consultants close to $200 million. Duggan worries the payout could put the city at risk of not meeting the terms of the city’s plan of adjustment – a plan the federal bankruptcy judge approved last week.

More from Helms and the Detroit Free Press:

Three people familiar with Duggan's views on the fees told the Free Press that the mayor believes the total fees could climb close to $200 million, an amount he worries could jeopardize the city's ability to meet the bankruptcy's financial terms. That compares to the roughly $100 million that many bankruptcy experts predicted would be the cost when Detroit filed for the nation's largest-ever municipal bankruptcy in July 2013.

A spokesperson for former emergency manager Kevyn Orr disputes that the bill could reach $200 million, saying the fees charged to the city reached $144.3 million as of October 31.

Sarah Cwiek / Michigan Radio

Having secured court approval for its bankruptcy restructuring last week, Detroit is now ready to emerge from bankruptcy.

But some Detroit residents and activists say that plan sacrificed both democracy and the public interest.

The group Detroiters Resisting Emergency Management says the bankruptcy process was about imposing financial solutions on social and political problems.

And they believe the newly-approved “plan of adjustment” won’t benefit the vast majority of Detroiters.

Whenever surveys are taken as to which professions are the most trusted and admired, journalists are pretty near the bottom. We used to beat out used car salesmen, but I think that thanks to regulation, they are in better standing these days.

Today, journalists and lawyers usually take turns at being the least admired. I don’t propose to talk about why lawyers are so unpopular; after all, I don’t want to be sued. But I do know why reporters are held in such low repute.

Part of it is our own fault.

As in, when a TV reporter sticks a microphone in the face of somebody whose child has been murdered and asks, “how do you feel?”

But even when we do our jobs well, we make people dread us. We tell you that the system doesn’t work, and the politicians are corrupt, and the water is tainted, and the priest is embezzling from the parish - things like that.

That’s what we are supposed to do.

We seldom show up just to tell you good news. Maybe the best thing we can say about our society is that decent behavior still isn’t news.

Except - in some contexts.

user Tyrone Warner / Flickr

This Week in Review, Jack Lessenberry and Rina Miller discuss Michigan’s anti-gay marriage law being upheld, the Detroit bankruptcy trial ruling, and what to expect during this term’s lame-duck session.


Federal bankruptcy Judge Steven Rhodes has approved Detroit's plan to exit bankruptcy. Rhodes' ruling comes after several major creditors reached deals with the city in recent weeks.

The ruling clears the way for the city to shed around $7 billion in debt.

More from the Detroit News:

It’s hard not be awed by the scale and detail in Diego Rivera’s Depression-era “Detroit industry” murals at the Detroit Institute of Arts, but these scenes depicting both the splendor and hardship of an industrial powerhouse were potentially at risk in the city’s bankruptcy.

That’s because right now, Detroit owns the museum and its world-class collection.

And that made Detroit’s creditors—collectively owed billions of dollars—ask: Why shouldn’t the city have to sell at least some of it to pay them?

Darren Walker, President of the Ford Foundation, says the idea was offensive.

“The idea that the art could actually be auctioned off was so … antithetical to our idea of democracy and the role of cultural organizations.”

But that fear actually turned out to be an important lever in the bankruptcy case.

Today on Stateside:

  • Detroit News business columnist Daniel Howes brings us up to date on the Detroit bankruptcy case and gives us a look ahead at what comes next.
  • Dave Brandon is now the former Athletic Director at the University of Michigan and the search has already begun for his replacement. Michigan Radio’s sports commentator John U. Bacon tells us who may be on the shortlist for the job.
  • The “Little Free Libraries” movement is taking root in Detroit.
  • James McCommons, wildlife photographer and professor at Northern Michigan University, talks to us his path to becoming one of America's leading conservationalists.
  • Our It's Just Politics team updates us on their 5 things to watch on election day. 
  • We talk about how money was spent in this election with Rich Robinson, director of the Michigan Campaign Finance Network. 

*Listen to the full show above

Detroit’s bankruptcy trial wrapped up Monday with closing arguments.

At issue: whether the city’s plan of adjustment to restructure its debt is “fair and equitable” to its various creditors, as required by Chapter 9 of the municipal bankruptcy code.

Judge Steven Rhodes must also decide if the plan is “feasible”—whether Detroit can balance its books and avoid slipping back into bankruptcy.

City of Detroit

Detroit emergency manager Kevyn Orr took the stand again Tuesday in the 22nd day of the city’s bankruptcy trial.

Orr testified mostly about Detroit’s recent settlement with bond insurer Financial Guaranty Insurance Corporation. That deal is outlined in a draft of the ninth version of Detroit’s plan of adjustment (the city’s proposal to “adjust” its debts in bankruptcy court).

Detroit bankruptcy judge Steven Rhodes.
John Meiu / Detroit Legal News Publishing LLC

During a brief hearing this morning in U.S. bankruptcy court, Judge Steven Rhodes declared his intention to make a final ruling on Detroit's plan to get out of bankruptcy.

Rhodes said he'll make his decision during the first week of November.

His announcement comes after the city announced that it had reached a deal with one of its last remaining major creditors. The Financial Guaranty Insurance Company will no longer oppose Detroit's plan to exit bankruptcy under the terms of a deal reached at 2:30 in the morning last week.

FGIC, which stood to lose $1.1 billion, agreed to terms that gives the company the right to develop the area where the Joe Louis Arena and parking garage now stand. The deal also gave them millions of dollars in credits for future purchases and city notes.

Rod Meloni of WDIV-TV was in court this morning live-blogging. He wrote about what we can expect next for the days remaining in Detroit's bankruptcy trial:

The Detroit Institute of Arts
Flickr

This Week in Review, Jack Lessenberry and Rina Miller discuss big name politicians stopping in Michigan to campaign for local candidates, the latest development in Detroit’s bankruptcy trial, and GM’s record global sales despite a dismal week on Wall Street.


When you look back at the long history of Detroit, yesterday may not have been quite as significant as July 24, 1701.

That was the day Cadillac and his men beached their canoes, scrambled up the riverbank near where the Cobo Center now stands, and started building a fort. But yesterday comes somewhat close.

Yesterday was the day the last major holdout creditor came to terms with the city, in a way that should help improve the city’s chances to make it after the bankruptcy process ends.

This also seems to remove the last threat facing the Detroit Institute of Arts. Financial Guaranty Insurance Company will get the land where Joe Louis Arena now sits, the place where the Red Wings play and where, 34 years ago, I saw Ronald Reagan nominated for President. Eventually, when a new hockey arena opens, this will be torn down and a gleaming new luxury riverfront hotel built here, surrounded by condos and some new retail.

Wikipedia

Detroit has reached a settlement with its last major holdout creditor in bankruptcy court.

Bond insurer Financial Guaranty Insurance Corporation holds $1.1 billion in Detroit debt. It insured a bad deal on city pension debt whose legality has been questioned.

FGIC had been the city’s last big foe in bankruptcy court. By signing onto the plan of adjustment Detroit has proposed to restructure its debts, it’s removed another hurdle slowing down the city’s exit from bankruptcy.

After a week-long recess, Detroit’s bankruptcy trial resumed Tuesday.

City lawyers spent more than two weeks making their case for Detroit’s proposed plan of adjustment to restructure its debts in bankruptcy. They rested last week.

Now, objecting creditors get their chance to argue that plan doesn’t meet the requirements of the municipal bankruptcy code.

Laura Bartell, a professor of bankruptcy law at Wayne State University, said the trial has gone “swimmingly” for the city so far.

If you love the Detroit Institute of Arts, and supported the “Grand Bargain” to save it, then you should be grateful that what surfaced this week wasn’t known a few months ago.

Specifically, the whopping raises and bonuses paid to Graham Beal, the director of the DIA, and Annmarie Erickson, the museum’s executive vice president and chief operating officer.

Two years ago, Beal, whose compensation is over half a million dollars a year, got a 13% raise. Erickson, who got a promotion and new responsibilities, got a 36% raise.

Trish P. / Flickr

All through the Detroit bankruptcy trial, the spotlight has been fixed on the Detroit Institute of Arts.

It has become one of the most contentious and confusing issues in the bankruptcy, as the appraisals of the DIA’s treasures have been wildly different. The city’s appraisal by Christie’s came in at just over $800 million, while an appraisal done by noted expert Victor Wiener pegs the value at more than $8 billion.

Beverly Jacoby is a noted art valuation expert who recently had an op-ed piece in the Detroit Free Press. She's the founder and president of BSJ Fine Art in New York.

Jacoby says there are several reasons for the wildly different values. Jacoby says an appraisal can vary depending on the party that commissions it. “A key issue with any appraisal is the appraiser is hired by a party and that party is the intended user," she says.  

The city of Detroit wrapped up its case in bankruptcy court today, with Detroit’s two top elected officials as the final witnesses.

Mayor Mike Duggan and City Council President Brenda Jones both took the stand.

Their testimony is key, because the city needs to convince Judge Steven Rhodes that its proposed plan of adjustment is feasible—and that city leaders will work together to execute it post-bankruptcy.

Jones had publicly opposed emergency manager Kevyn Orr, and his decision to file for bankruptcy.

Pages