Detroit bankruptcy

Marijuana plant.

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.

Detroit will exit bankruptcy.
Ian Freimuth / Flickr

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:

Part of the Diego Rivera mural in the DIA. Foundations pulled together to help save the art in the museum.
Joseph Gallegos / Flickr

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).

DPS emergency manager 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

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.


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.

Mitt Romney
(courtesy of

This Week in Review, Jack Lessenberry and Rina Miller discuss Mitt Romney’s recent Michigan visit, billionaire businessman Dan Gilbert’s testimony in Detroit’s bankruptcy trial and allegations that Ferndale police are issuing a disproportionate number of tickets to black drivers. 

Sam Beebe

Detroit emergency manager Kevyn Orr will continue testifying today in Detroit’s bankruptcy trial.

Orr, a bankruptcy lawyer, took the stand for the first time Wednesday afternoon. He’s the main architect of Detroit’s bankruptcy restructuring plan, formally known as a plan of adjustment.

That plan is ultimately what’s on trial; Judge Steven Rhodes needs to approve it for the city to emerge from bankruptcy.

But while Orr is a crucial witness for the city, there was nothing particularly new or noteworthy about his initial testimony.

State of Michigan

As of Friday morning Detroit’s elected officials are back in charge of city operations—but Kevyn Orr is still technically the city’s emergency manager.

That’s because Detroit officials have approved a deal stripping Orr of most of his powers.

In the deal approved by the City Council and Mayor Mike Duggan Thursday, Orr will stay on as emergency manager until Detroit exits bankruptcy.

Detroit Emergency Manager Kevyn Orr speaking at the University of Michigan.
U of M

After voters rejected the state's old emergency manager law in November 2012, Michigan lawmakers quickly came up with a replacement.

State-appointed emergency managers could still take control over local governments and school boards, but under the new law, they could do so for a limited amount of time. 

The new law, Public Act 436, allows for local governments to end a state-appointed emergency manager's term after 18 months. From the law:

If the emergency manager has served for at least 18 months after his or her appointment under this act, the emergency manager may, by resolution, be removed by a 2/3 vote of the governing body of the local government. If the local government has a strong mayor, the resolution requires strong mayor approval before the emergency manager may be removed. 

Orr started work as Detroit's emergency manager on March 28, 2013, so his 18 months is up in the next few days.

Almost everyone thought Detroit City Council and Mayor Duggan would vote to end Orr's appointment, but with Detroit's bankruptcy process wrapping up in court, the talk has changed.

Sarah Cwiek / Michigan Radio

Detroit emergency manager Kevyn Orr has joined private, ongoing talks between Mayor Mike Duggan and the Detroit City Council about his future.

Under Michigan’s emergency manager law, the City Council could vote to remove Orr this week – but only if Duggan and Gov. Rick Snyder agree.

The parties have been meeting in closed session since Tuesday to discuss a transition plan. No one has been willing to speak publicly about those discussions.

Judge Steven Rhodes said he'll rule next Monday whether to put a temporary halt to Detroit's controversial water shutoffs.

Witness testimony continued in federal bankruptcy court Tuesday with hearings to determine the fate of that policy.

A coalition of Detroit residents and advocacy groups filed a lawsuit challenging the city’s controversial shutoff policy on constitutional and civil rights grounds.

Col. Frank J. Hecker House in Detroit
User: Werewombat / Wikimedia Commons

DETROIT - A Plano, Texas, company has been hired to give Detroit a clear picture of how much individual properties in the city are worth.

Tyler Technologies Inc. says its appraisal arm will compile data on real property in the city. It says Detroit has not completed a full reappraisal of real property in more than 50 years.

A spokesman for emergency manager Kevyn Orr says Tyler's CLT Appraisal Services unit will give the city a "more accurate assessment of property values." Bill Nowling says the city will use it to "create more accurate property tax bills."

Mayor Mike Duggan said earlier this year that the city would lower property tax bills by reassessing home values. He says high, unrealistic property assessments have angered city residents and forced many from their homes.

The week in Michigan politics

Sep 17, 2014
State capitol
Lester Graham / Michigan Radio

This Week in Michigan Politics, Emily Fox and Jack Lessenberry discuss the possibility of new teachers losing their pensions, the latest in the Detroit bankruptcy trial, and how Aramark is under fire again.

Many years ago, I met Thomas Friedman, the distinguished New York Times journalist who won two Pulitzer Prizes for his coverage of the Middle East by the time he was 35.

When I told him that I regarded his reporting as indispensable, he told me something I’ll never forget. He said “don’t read my stories every day.”  That startled me, and I asked what he meant.

He went on: “Daily journalists covering a beat have to produce a story just about every day.” That’s partly because everybody doesn’t always read everything. But if you look closely, you’ll see that much of the time, much of the daily stories are repetitious.

Bank of the Oise at Auvers by Van Gogh, owned by the DIA
user: Maia C / Flickr


As the Detroit bankruptcy trial moves into its third week, the spotlight has often been trained on the Detroit Institute of Arts.

The discussion over whether the DIA can and should be forced to sell its treasures to help offset Detroit's insolvency has been one of the most hotly debated issues of the bankruptcy.

DIA director Graham Beal recently wrote a letter that was published in the museum's newsletter and then posted on Deadline Detroit under the headline "Museums Should Step Very Carefully 'In Times Of Crisis.'"

Here's an excerpt of the letter:

In the Great Depression, the DIA remained open and staffed, largely thanks to the secret support of Edsel Ford. The city of Detroit arts commissioners could have sold the van Gogh self-portrait, Matisse's The Window, Ruisdael's Jewish Cemetery, or even Breugel's Wedding Dance, but the thought never seems to have crossed anyone's mind.

user memories_by_mike / Flickr

The pieces are falling into place for Detroit to eventually emerge from bankruptcy with a lot less of its budget-servicing debt. But the city of Detroit’s budget could still be a house of cards. Many of its revenue sources are not stable.

Bankruptcy does not mean Detroit escapes all of its money problems.

It’s heavily dependent on a city income tax. If another economic dip is around the corner, that source of revenue would shrink.

Casino taxes are stagnant.

Gerald Rosen, the bankruptcy judge in charge of mediation, issed the order today.
Detroit Legal News

One big creditor, Syncora, appears to have agreed to a deal with the city this week.

That left one very big fish to fry - the bond insurer Financial Guaranty Insurance Co.

The city owes the group more than $1 billion, and they're not walking away from the money that is owed to them without a fight.

Now the bankruptcy court overseeing Detroit's bankruptcy has ordered FGIC, along with several others, into mediation with the city.

From the order:

It is hereby ordered that, unless otherwise excused by the mediator, the above-named noticed parties shall appear, with counsel and party-representatives with full and complete settlement authority, for continuing mediation on Friday, September 12, 2014, at 10:00 a.m., and continuing day-to-day thereafter as deemed necessary, until released by the mediators…

Robert Snell of the Detroit News reports that FGIC negotiators walked out of talks with the city two weeks ago.

Now, with the Syncora deal close to inked, FGIC is being compelled to try it again.

In a statement Wednesday, FGIC said the firm remains open to a good-faith settlement following the Syncora deal.

“The latest deal reinforces our view that the city has abundant sources of incremental value available ...,” the company said. “However the issue at hand is their willingness to distribute this value fairly and equitably...”

Syncora went from a deal that was going to give the company around 10 cents on the dollar, to a deal that's giving them around 26 cents on the dollar.

Aside from Syncora and FGIC, the other creditors ordered into mediation are:

  • UBS AG
  • SBS Financial Products Co., LLC
  • Merrill Lynch Capital Services, Inc.
  • Ambac Assurance Corp.
  • Black Rock Financial Management
  • Official Committee of Retirees
  • Wilmington Trust Company, National Association, as successor to U.S. Bank National Association, as Trustee and Contract Administrator