Detroit bankruptcy

Detroit skyline.
user JSFauxtaugraphy / Flickr

The official name for it is the “plan confirmation hearing.” The commonly used term is “Detroit’s bankruptcy trial.” And it begins today.

Stephen Henderson is the editorial page editor at the Detroit Free Press. He joined Stateside today to talk about what will be decided and the big questions in the trial.

“(The central question) really has to do with the grand bargain,” says Henderson, “which brings into the bankruptcy proceeding more than $700 million from people who have nothing to do with this proceeding.”

Detroit’s bankruptcy has been with us so long that it is hard to believe that the actual trial is only starting today.

Technically, it is not a trial in the strict sense of the word, but something called a “plan confirmation hearing.”

But it is, in a very real sense, Detroit’s trial of the century. That’s an overused phrase, but totally appropriate here.

In fact, U.S. Bankruptcy Judge Steven Rhodes, the most important figure in all of this, said it all last week: What happens here will determine “the future of the city of Detroit.”

Actually, it might be technically correct to say that this trial will determine whether the city has a future.

Detroit's historic bankruptcy case is entering the home stretch. The crucial, final trial phase begins Tuesday in a Detroit courtroom.

The trial will decide the fate of a plan to wipe out billions of dollars in debt and help Detroit emerge from bankruptcy as a new, revitalized city.

This trial is a big deal, but don't expect anything with lots of courtroom drama. For one thing, it's federal bankruptcy court — and there's no jury.

Ross Kuhn / via Facebook

Some Detroit residents and activists are trying to put water shutoffs on hold—again.

The Detroit water department resumed its residential water shut-off program for delinquent customers this week. It’s trying to collect more than $80 million in back payments.

The city had put the controversial program on hold for about a month, while holding water assistance fairs and giving those who struggle to pay their bills time to get on payment plans.

The Detroit Institute of Arts
Flickr

A New York lender called Art Capital Group is offering a $4 billion loan to the city of Detroit if it puts up its art collection as collateral.

Detroit News business columnist Daniel Howes said the city would be wise to pass on this offer.

The proposal is being backed by holdout bond insurers Syncora, and the Financial Guaranty Insurance Company.

Howes said the proposal would put DIA art one step closer to being sold, pensioners would receive a lot less money, and the loan would be spread around to other creditors.

Howes said city officials said they were not interested in discussing the deal, and that they say they will stand behind the "Grand Bargain" because it is money in hand and the deal will help avoid legal issues.

Howes also said the offer is just now coming up to stall the bankruptcy trial.

Read Howes column in the Detroit News here.

*Listen to the full interview with Daniel Howes above. 

Detroit skyline.
user JSFauxtaugraphy / Flickr

Bridge Magazine writer Mike Wilkinson recently wrote a piece that explored the dollars-and-cents of Detroit, post-bankruptcy and beyond.

It's titled “Can Detroit Pay Its Bills Post-Bankruptcy?”

Wilkinson said though Detroit has been cash strapped for a while in terms of debt, it does generate a lot of money. It has the highest income tax and property tax in the state. It is the only city in the state allowed to levy a utility tax. And it has an averaged $179 million in casino taxes.

“It’s raising more money than Cincinnati, Chicago, Kansas City, Orlando, in terms of per person,” Wilkinson said.

Assuming that Kevyn Orr’s Plan of Adjustment is approved by Judge Rhodes, will this revenue be enough to pay the bills? Wilkinson wrote in his piece, “Revenues alone do not a budget make.”

And Eric Scorsone, an MSU professor and expert on city finances, said in order to answer that question, we must ask what will Detroit spend the money on?

“The truth is it would be very easy to overspend again as Detroit has in most of its history, and that’s going to be the real challenge for the political leadership of Detroit.” Scorsone said.

The Detroit water department recently announced a temporary break in its campaign to cut service to delinquent customers—but some people are still being shut off.

Last week, water officials agreed to a 15-day “pause” in water shutoffs, which have ramped up since March as the department tries to collect millions in delinquent payments.

Detroit retirees voted overwhelmingly to approve emergency manager Kevyn Orr's plan of adjustment.

That plan includes the unprecedented "grand bargain"--a mixture of public and private funds that will minimize cuts to city pensions, while protecting the Detroit Institute of Arts' assets from other city creditors.

But retirees aren't the only group of creditors who voted on the plan. Other groups did as well--and not all voted "yes."

Detroit Institute of Arts

The proposed "grand bargain" that would soften the blow to Detroit pensioners while preserving the city's art collection has cleared a major hurdle.

That's because city retirees have voted for the plan by an overwhelming margin.

As city creditors, pensioners got to cast ballots for or against emergency manager Kevyn Orr's bankruptcy restructuring. The grand bargain is an integral part of that plan of adjustment.

We should know how Detroit retirees voted on the proposed “grand bargain” later today.

City pensioners had until July 11th to vote on the city’s bankruptcy restructuring plan, formally known as the “plan of adjustment.”

The grand bargain is just one part of that plan.

It would use more than $800 million in combined state and private foundation dollars to backstop city pension funds, minimizing retiree losses.

Kenny Karpov

Hundreds of protesters gathered near city hall in downtown Detroit Friday, to demand the city stop ongoing water shutoffs.

More than 17,000 Detroit households have had their water shut off for non-payment since March, though many have since had service restored.

City officials say the shutoffs are a necessary measure, because too many people simply don’t pay their bills--starving the water system of up to $100 million in revenues.

Detroit skyline.
user JSFauxtaugraphy / Flickr

Tomorrow afternoon at 4:06 is the one-year anniversary of the largest municipal bankruptcy in American history.

Detroit News Business Columnist Daniel Howes has been talking with top business leaders in Detroit for a "temperature check" on how this first year has gone.

He said that the kind of leadership and coalescence that happened in the past year was something he’s never seen before in this community.

Detroit Institute of Arts

The Detroit Institute of Arts is closer to fully funding its portion of the “grand bargain.”

The museum announced $26.8 million in additional corporate pledges today on Wednesday.

8 companies announced contributions. The Penske Corporation led the way with a $10 million donation, while both Quicken Loans/Rock Enterprises and DTE Energy chipped in $5 million.

Mackinac Bridge
Julie Falk / Flickr

This Week in Review, while Emily Fox sits in for Rina Miller, she and Jack Lessenberry discuss how selling works from the Detroit Institute of Arts wouldn't make financial sense in helping with the city's bankruptcy, the threat of an oil spill under the Straits of Mackinac, and money problems with Flint Community Schools.

Sam Beebe

Today was the deadline for Detroit retirees to vote on the city’s bankruptcy restructuring plan, known formally as a “plan of adjustment.”

The California firm tallying the votes had to receive them by today.

All creditors get to vote on the plan of adjustment. But pensioners’ votes are particularly key—especially when it comes to the future of the “grand bargain.”

That’s the deal to use more than $800 million in public and foundation money to minimize pension cuts, and protect the Detroit Institute of Arts’ collection from being sold to pay off creditors.

The Detroit Institute of Arts
Flickr

A new appraisal of the Detroit Institute of Arts' collection has found the works could be worth between $2.7 billion and $4.6 billion dollars. That's a big difference from the $867 million value that Christie's put on the collection last fall.

Detroit News Business columnist Daniel Howes joined us to tell us what he saw in the evaluations.

Howes clarified that the $867 million valuation by Christie’s only looked at 5% of the DIA’s collection, whereas the new appraisal evaluated its entire collection. He also pointed out the caveat attached to the big $4.6 billion number: “If you try to sell big chunks of the collection at the same time, you likely press the prices dramatically.”

Paul Hitzelberger / United Photo Works

In Detroit, controversy is raging over one of the few things the bankrupt city has in abundance: water.

So far this year, Detroit has shut off for 17,000 customers as it tries to collect millions in overdue bills.

But many residents are upset with how the city is going about it—and question whether some are getting special treatment.

“Here we are, giving out water…and we still owe on the water bill”

Detroit Institute of Arts

A New York art investment firm says, on paper, works at the Detroit Institute of Arts could be worth as much as $4.6 billion. But the report by ArtVest Partners says the artwork could go for a lot less, if it's liquidated as part of the city's bankruptcy.

An earlier appraisal of the DIA's collections by Christie's auction house looked only at works bought with city money, and said selling those would bring in no more than $866 million.

State of Michigan / Michigan.gov

Detroit emergency manager Kevyn Orr has given the city’s leaders a pay raise.

Orr signed an order hiking city appointees and elected officials’ pay by 5% on June 30th. It went into effect July 1.

Detroit Mayor Mike Duggan seemed genuinely surprised to hear that news on Tuesday.

Deadline approaches for bankruptcy plan vote

Jul 6, 2014
Detroit skyline.
user JSFauxtaugraphy / Flickr

DETROIT (AP) - The most anticipated vote in Detroit this summer isn't for a city office.

Instead, ballots due by Friday from city retirees could determine how quickly Detroit exits its historic bankruptcy and how much of the financial weight pensioners will bear.

Non-uniformed retirees are being asked to take a 4.5 percent pension cut and no cost-of-living allowances. Police and fire retirees are faced with reduced cost-of-living payments.

There are over 43,000 pictures in the interactive from The New York Times.
Screen shot of NYT interactive

I timed myself and it took me a minute and 21 seconds to scroll through the images of Detroit's blight. Initially, I didn't even read any of the analysis that The New York Times provided, I just scrolled. 

The Times has done several interactive pieces on blight in Detroit. There's been a wealth of data since the Detroit Blight Removal Task Force Plan was published.

This one really makes you realize how vast the city's housing problem actually is.

Their analysis breaks blight up geographically with different anecdotes and facts. Here are two examples:

7 Mile Road:

While most of the properties on the foreclosure list were residential, about 5 percent were sites of former businesses, of which a majority were vacant lots or unoccupied structures. Many were formerly gas stations, auto body shops and car washes. 

Lenox Street:

Ronald Ford Jr. says he has struggled to find work as a laborer and to pay his bills, let alone the $7,000 in property taxes that he now owes. His family bought the house in 1969, and his mother made the final mortgage payment years ago. But he said they stopped paying the taxes after she grew ill and moved into a nursing facility.  

-- Lucy Perkins, Michigan Radio Newsroom

Sarah Cwiek / Michigan Radio

This week, the Detroit Journalism Cooperative is looking at how the city is functioning under bankruptcy.

Mayor Mike Duggan says his top priority is reversing the city’s long population decline.

But there are a couple key quality of life issues Duggan has no control over. One of them is the city’s schools.

Here’s the story of one Detroit family’s effort to find good schools.

Meet the Hills

Sam Beebe

The judge in charge of Detroit’s bankruptcy case tentatively agreed Thursday to tour parts of the city—despite concerns about his safety.

City lawyers have been pushing Judge Steven Rhodes to take a city bus tour for some time now.

They say the judge needs to see the conditions in Detroit neighborhoods firsthand, to help him make informed decisions in the case.

Mike Duggan

The city of Detroit continues to work through bankruptcy, at the same time Mayor Mike Duggan, now six months into his term, has been working to return basic city services to residents in the city. 

Joining us today were Ken Sikkema, Former Senate Majority Leader and Senior Policy Fellow at Public Sector Consultants and Susan Demas, publisher of Inside Michigan Politics.

Detroit remains under the emergency management of Kevyn Orr, but Duggan really positioned himself as more of a chief operating officer when he was running for mayor. How much of what we see happening in the city is the result of efforts by Orr and how much of it is Duggan?

Listen to the full interview above.

dwsd.org

The people who run Detroit’s water system faced fierce criticism Wednesday, after the United Nations issued a statement calling the city’s mass water shutoffs a possible human rights violation.

Critics lined up to blast officials at a Board of Water Commissioners meeting for ongoing efforts to cut off customers with unpaid bills.

Many cited the UN’s assertion that “when there is genuine inability to pay, human rights simply forbids disconnections.”

Michigan Attorney General Bill Schuette is jumping in the fight to prevent one of Detroit’s major creditors from accessing the personal financial records of city retirees.

Bond insurer Syncora Guarantee Inc. is on the hook for hundreds of millions of dollars if Detroit’s plan for exiting bankruptcy moves forward.

Steve Carmody / Michigan Radio

DETROIT (AP) - Detroit has announced settlements with its largest union and a group of unsecured bondholders.

Mediators said Friday the bankrupt city completed a series of tentative agreements with the American Federation of State, County and Municipal Employees Council 25.

In a statement, AFSCME Council 25 President Al Garrett says the deals represent "the best path forward for city employees and retirees."

The Detroit Free Press reports that terms of the union agreements weren't released.

The Detroit Institute of Arts.
Detroit Institute of Arts

The Detroit Institute of Arts is getting more help raising money for its share of the deal meant to shield its collection from possible liquidation.

The New York-based Mellon Foundation and Los Angeles-based J. Paul Getty Trust have committed a combined $13 million toward the “grand bargain.”

That proposal would direct more than $800 million to Detroit’s pension funds--sparing pensioners from severe cuts, while legally safeguarding the DIA’s assets from being sold to pay off city creditors.

The DIA needs to come up with a $100 million contribution to the grand bargain, this new commitment puts them more than 80% of the way there.

Getty Trust President and CEO James Cuno says the two foundations made a decision to contribute on their own.

“We jointly made the commitment,” Cuno says. “There was no conversation with the DIA about it, no request from the DIA.”

Cuno says the donation reflects the North American art world’s support for maintaining the DIA’s collection as a civic institution and public resource “in perpetuity.”

If put up for sale, the collection “would be lost to private individuals around the world,” Cuno says. “And the public of Detroit, and surrounding suburbs, would be deprived of a public resource they once had.”

Cuno says it’s “too soon to tell” whether the money will be disbursed to the museum as a lump sum upfront, or spread out over a period of years. Donors and museum officials are waiting for the larger grand bargain to be finalized.

Earlier this week, Detroit’s 3 automakers pledged a combined $26 million toward the DIA’s contribution.

Judge Steven Rhodes has set an Aug. 14 trial on Detroit's plan to get out of bankruptcy.

 Reid Bigland of Chrysler speaks at the media event announcing that U.S. automakers will contribute to the 'grand bargain.' Bigland is standing in front of one of the famous Diego River murals at the DIA.
Reem Nasr / Michigan Radio

It seems momentum behind Detroit's municipal bankruptcy reorganization continues to build. If the momentum continues, the city could emerge from bankruptcy this fall.

Today, General Motors, Ford, and Chrysler pledged to contribute a combined $26 million to a deal aimed at reducing cuts to Detroit pensioners while preserving the art collection at the Detroit Institute of Arts (part of the collection has been talked about as a city asset that could be sold to satisfy Detroit's creditors).

The money from the automakers will go into large pot of money – more than $800 million – collectively known as the "grand bargain."

So far, money for the grand bargain is coming from private philanthropists, foundations, the state of Michigan, and money raised by the DIA itself. The automakers' money will be counted toward the DIA's goal of $100 million.

user paul (dex) / Flickr

This Week in Review, Jack Lessenberry and Rina Miller discuss General Motor's CEO Mary Barra's response to the investigation of the faulty ignition switch recalls, what happens now for Detroit after the state agreed to give the city $195 million, and an update on road funding.


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