Detroit bankruptcy

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

U.S. Bankruptcy Judge Steven Rhodes ruled this morning that the city of Detroit is allowed to protect itself from its creditors under Chapter 9 municipal bankruptcy protection. In his ruling, Rhodes said pensions can be treated like any other debt and are subject to potential cuts. We've been following the news as it unfolds today.

Update 3:31 p.m.

Michigan Attorney General Bill Schuette issued a statement today saying he supported the bankruptcy ruling, but was "deeply disappointed" with Rhodes' ruling that pensions are eligible for cuts.

Bob Jagendorf / Flickr

 Today, Judge Steven Rhodes of the United States Bankruptcy Court ruled that while the City of Detroit did not negotiate with creditors in good faith, it did file for bankruptcy in good faith. His ruling makes Detroit eligible to file for the largest municipal bankruptcy in this country’s history.

David Shepardson, Washington reporter with the Detroit News has been following the bankruptcy. He joined us to talk about this historic ruling, and what to watch for in the coming months. 

Listen to the full interview above.

Today, virtually all eyes are on Detroit, where U.S. Bankruptcy Judge Steven Rhodes rendered his historic decision this morning. That’s exactly as it should be. There is no more important story in the state right now, and our futures are all tied in with the Motor City. But that’s not the only thing happening.

I always feel uneasy when the media’s attention strays too far from the legislature. That’s a bad idea, for the same reason leaving a two-year-old unattended in the kitchen is a bad idea. There are sharp objects, and they can hurt themselves and others.

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Judge to announce Detroit bankruptcy eligibility today

A judge is expected to announce today whether Detroit is eligible for bankruptcy. If so, Detroit will be the largest public bankruptcy in U.S. history. It has $18 billion in debt.

Anti-abortion coverage proposal moves forward

"State lawmakers will consider a proposal to put new restrictions on abortion insurance coverage in Michigan. A state board yesterday certified that Right to Life of Michigan has collected enough signatures to send its petition to the Legislature. Under the measure, women would only be able to purchase abortion coverage as a separate policy. It could not be part of standard health plans," Jake Neher reports.

State workers might get pay hike, but pay more for health care

"The state Civil Service Commission is considering giving state workers a two-percent pay increase, while requiring many of them to pay more out-of-pocket for health insurance. The proposal is meant to end a contract impasse between the state and public employee unions," Jake Neher reports.

Tomorrow will be a historic day in Detroit. That's when a federal judge will decide whether the city is eligible for Chapter 9 bankruptcy protection. On today's show, we took a look at the different ways Judge Steven Rhodes could rule.

Then, we took a look at the future of newspapers. As newsrooms get smaller, and more people hop online for information, will the industry be able to reinvent itself and keep up with the times? 

And, the U.S. Supreme Court heard arguments this morning in a case that pits Michigan against an Upper Peninsula Indian tribe. We discussed the case with Rick Pluta, who is reporting from Washington D.C..

Also, we spoke to a new Michigan music duo, The Accidentals. 

But, first on the show, the Board of State Canvassers today certified a voter-initiated petition that would put new restrictions on abortion insurance coverage in Michigan. The proposal would ban abortion coverage in standard health insurance plans. Women would only be able to purchase abortion coverage as a separate rider. The measure now goes to the state Legislature, which has 40 days to pass it. If not, it will go to voters on the 2014 ballot.

MLive reporter Jonathan Oosting joined us today to discuss the issue.

Joy VanBuhler / Flickr

Tomorrow will be one for the history books, not just here in Michigan but across the nation.

Tuesday morning is when Federal Bankruptcy Judge Steven Rhodes will rule whether or not Detroit is eligible for Chapter 9 bankruptcy protection.

Detroit News reporter Chad Livengood has covered the bankruptcy trial, and he joined us today to talk about what might happen tomorrow morning.

Listen to the full interview above.

Tomorrow morning, Federal Bankruptcy Judge Steven Rhodes will announce whether or not Detroit can file for bankruptcy. If, as expected, he does authorize this, it will mean grim times ahead.

The city almost certainly will lose some assets; creditors will get paid only a fraction of what they are owed, and elderly and retired city workers may lose at least some of their pensions.

None of this will be easy, or fun. But we all have to hope that is exactly what the judge does. Otherwise, the city will be in the position of a dying lamb among a flock of turkey buzzards.

The city has close to 100,000 creditors who together are owed probably more than $18 billion. If the judge rules Detroit is ineligible for bankruptcy, then that will take the freeze off all the lawsuits creditors filed against the city before the Motor City asked for bankruptcy protection back in July. 

Peter Martorano / Flickr

In this Week in Michigan Politics, Christina Shockley and Jack Lessenberry discuss a proposal to block abortions from being covered in basic health plans, how Warren Buffett is backing millions of dollars in an initiative to help small businesses in Detroit, and look to next week when Judge Steven Rhodes will decide if Detroit is eligible for bankruptcy.

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Federal judge will announce if Detroit is eligible for bankruptcy next week

"A judge says he'll announce Dec. 3 whether Detroit is eligible to get rid of its debts in bankruptcy court," the Associated Press reports

Michigan and federal government investigate fungal meningitis outbreak

"Michigan Attorney General Bill Schuette is joining forces with federal authorities to investigate last year’s fungal meningitis outbreak. Michigan was hardest-hit by the nationwide outbreak that’s linked to tainted steroids from a Massachusetts compounding pharmacy," Sarah Cwiek reports.

Enough signatures collected to propose a ban on abortion coverage

"Michigan abortion foes have collected enough signatures to put a proposal before lawmakers to ban abortion coverage from health plans unless a separate policy is bought," the Associated Press reports.

Detroit Skyline
Dave Linabury / Flickr

As Detroit has slid its way down the slippery slope to bankruptcy, the eyes of the world have been fixed on the Motor City.

Whether it was Time Magazine renting a house for embedded reporters, Bob Simon of 60 Minutes comparing Detroit to Mogadishu, chef Anthony Bourdain comparing Detroit to Chernobyl, using the description "post-apocalyptic," the outsiders' view of Detroit has been, to put it gently, negative.

Our next guest has raised the question: what happened when outsiders are shaping Detroit's narrative? When Detroit and its leaders and stakeholders can't articulate a consistent message, someone else is going to do it. And how is that Narrative-Shaped-By-Outsiders going to affect Detroit's destiny?

Detroit Free Press Staff Writer Mark Stryker explored this in a recent piece "Seeking Detroit's Voice: Lack of message lets others shape the narrative." He joined us today to discuss the issue.

Listen to the full interview above.

 A new report says declining revenues and bad Wall Street deals—not out-of-control spending or generous pension benefits--contributed the most to Detroit’s bankruptcy.

The report from the left-leaning think tank Demos also accuses Emergency Manager Kevyn Orr of attacking the problem in “inappropriate” ways that are “not rooted in fact.”

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.

It's anyone's guess as to when the ruling will come, but most seem to think the bankruptcy will be approved in some form.

If it's not, at least one expert seems to think bad things could happen. From Crain's Detroit Business:

"If the bankruptcy is disallowed, frankly, expect all hell to break loose," said Anthony Sabino, a lawyer who teaches business law at St. John's University in New York. "Detroit will be at the mercy of its creditors in individual lawsuits spread amongst federal and state courts. That chaos alone could doom the city."

Hell breaking loose? Doomed?

Well, a bomb wouldn't drop, but the downward financial spiral would certainly continue as creditors that haven't been paid would sue for the money they're owed.

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Budget director's brother proposes $5 million state project

"A company run by the brother of Michigan’s budget director proposed a $5 million project that is part of the state budget. The company is now bidding to win the contract," Rick Pluta reports.

Report blames Wall Street for Detroit bankruptcy filing

"A new report says declining revenues and bad Wall Street deals contributed the most to Detroit’s bankruptcy. The report from the think tank Demos argues that Detroit IS bankrupt — but that’s because of the city’s cash flow problems, not its debt," Sarah Cwiek reports.

Another Heidelberg house up in flames

"Fire has destroyed another house that makes up the Heidelberg Project outdoor art installation in Detroit. The fire burned early this morning at the structure known as the Penny House on the city's east side. A building known as the "House of Soul" was destroyed by fire earlier this month," the Associated Press reports.

When we talk about Detroit's bankruptcy filing, the point seems to almost always be made that this is historic. That Detroit is the largest city in U.S. history to seek bankruptcy protection. But, that was almost not the case. In the mid 1970's New York City was on the brink of financial crisis. On today's show: What can Detroit learn from New York's comeback?

And, as of today, the University of Michigan Hospitals and Health Centers will no longer sell sugar-sweetened drinks. It's a not-too-subtle push to get healthy, but is it taking away our choice as a consumer? Is it going too far?

Also, the Michigan Women's Hall of Fame has just announced its latest list of inductees. We took a closer look at one of these influential Michigan women.

First on the show, Republicans in Lansing are split over whether people who bankroll so-called “issue ads” should be allowed to remain anonymous.

Issue ads attack or support politicians or causes without using what are called “magic words" like “vote for” or "oppose." Unlike campaign ads, the money behind issue ads can be anonymous.

But, late last week, Michigan Secretary of State Ruth Johnson proposed new rules that would require disclosure of issue-ad donations.

Johnson said, too often, issue ads are just thinly disguised political ads, and people should know who is paying for them.

But, many Republicans disagree. In fact, within hours of Johnson's proposal, the GOP-led Senate acted quickly to amend a campaign finance bill that would make Johnson's new rules illegal.

Rich Robinson, Executive Director of the Michigan Campaign Finance Network, and Jonathan Oosting, Capitol reporter for MLive.com, joined us today.

Peter Martorano / Flickr

In virtually every discussion and report about Detroit's bankruptcy filing, the point is made that this is historic. That Detroit is the largest city in U.S. history to seek bankruptcy protection.

But, that nearly was not the case. New York City was a hairs-breadth away from earning that unenviable distinction in 1975.

We wondered what comparisons could be made between Detroit's crisis today and New York's in the 70's, and if there are lessons Detroit could learn from New York's recovery.

Out next guest has taught at Yale for 46 years, he was part of five New York City governments and he is a noted urban planner, educator and author of The Planning Game: Lessons from Great Cities and The American City: What Works, What Doesn’t.

Alex Garvin joined us today from New York City.

Listen to the full interview above.

Patricia Drury / Flickr

To call Detroit’s legacy costs underfunded would be, well, an understatement.

According to the city’s numbers, Detroit’s pension and retiree healthcare funds are about $9.2 billion short.

But Detroit is not the only Michigan city with major legacy costs — not by a long shot.

Legacy costs, or costs undertaken by local government for future use, have been taken on by more than 280 of Michigan’s 1,800 communities, according to data compiled by Bridge Magazine.

And while Detroit has the highest amount of total unfunded legacy cost, the per capita numbers show a slightly different picture.

As we know, no major city has ever been in the position Detroit is in now. What was once the Arsenal of Democracy, a proud and vibrant city of two million people, is now in bankruptcy court, asking a federal judge to let it be reborn.

The city has lost two thirds of its population and far more of its wealth. There are tens of thousands of abandoned buildings.  Earlier this year, Detroit was taken over by the state, and is now being run by a state-appointed emergency manager.

City services are so bad the voters, the vast majority of them black, just elected a mayor who is a white political boss from the suburbs, in the desperate hope that he could somehow fix things. Mike Duggan clearly intends to try.

The scope of the problem is almost beyond imagining, in part because for too long, nobody was willing to admit the facts, not even to themselves. Now, the city has been forced into a rendezvous with reality.

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.

Detroit’s elected leaders are shocked that the state has put a strict limit on how much it will pay for the city’s many restructuring consultants.

Under a memorandum of understanding signed last year, the state agreed to reimburse Detroit for half the cost of those outside contractors.

But Detroit’s finance director told the City Council Wednesday those reimbursements would be capped at $5 million.

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.

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

Today is the last day U.S. Bankruptcy Judge Steven Rhodes will accept documents from all sides of the Detroit bankruptcy case.

Rhodes will then look at all the evidence and decide whether the city of Detroit can reorganize itself under Chapter 9 bankruptcy laws. 

Rhodes has heard a lot. The city's future path will be up to him.

His decision will be based upon a) whether the city truly has no other options to pay its debts, a b) whether the city negotiated in good faith with its creditors prior to saying bankruptcy was the only way.

No one seems to be arguing that the city has a viable way to pay its debts. And Daniel Howes of the Detroit News argues that defining "good faith" negotiations in exceedingly difficult in this case.

That's because Detroit owes money to nearly 100,000 creditors.

Steve Carmody/Michigan Radio

DETROIT (AP) - The city of Detroit is suspending a plan to change retiree health insurance, at least through February.

Emergency manager Kevyn Orr says his staff will negotiate with a committee created to represent retirees during the city's bankruptcy case. He hopes it will lead to a long-term solution.

The city had proposed shifting retirees to Medicare, effective Jan. 1. Retirees under age 65 would have been given a $125 monthly stipend to get their own insurance.

Steve Carmody/Michigan Radio

DETROIT (AP) - Attorneys have ended final arguments in a rare trial to determine whether Detroit can become the largest municipality to fix its finances in bankruptcy court.

The daylong remarks Friday for and against a Chapter 9 reorganization now will be sorted out by Judge Steven Rhodes. He could take days to make the decision.

Well, it was quite a week for our state’s largest city. Voters elected a white mayor for the first time since 1969.

Had you gone to Lloyds of London 10 years ago and bet that within a decade, America would have a black president and Detroit a white mayor, today you would be very rich indeed.

But in the city Cadillac founded, attorneys today will offer closing arguments in a trial to determine whether the city will be allowed to file for bankruptcy. While everything in Federal Judge Steven Rhodes’ courtroom is by the book, there is an element of Kabuki-theater unreality about it all.

Nobody really believes the application will be denied. If it were, creditors would tear what remains of Detroit apart with the efficiency of a pack of wolves with a lamb.

Closing arguments start Friday in Detroit’s bankruptcy eligibility trial.

Witness testimony wrapped up this week, with former State Treasurer Andy Dillon and one of Governor Snyder’s top aides, Rich Baird, both taking the stand.

Dillon testified that he was “skeptical” after seeing Detroit emergency manager Kevyn Orr’s June proposal to city creditors, which included steep cuts to unsecured creditors, including pensions.

Associated Press

Former state Treasurer Andy Dillon finished his testimonial in Detroit’s bankruptcy trial, bringing his three-day testimonial to a close.

On Tuesday, Dillon defended his recommendation for Detroit’s bankruptcy filing, saying it was a “last-resort option.” But some of Detroit's creditors are arguing that the decision to file for Chapter 9 bankruptcy was not exactly a last resort, but instead a quick decision that overlooked an opportunity to continue negotiations.

Here's the comment Detroit Emergency Manager Kevyn Orr made to a public meeting on June 10, 2013. It's on loop, in case you miss it the first go 'round:

This statement was played for the courtroom by a lawyer representing the city's pension funds. He was trying to prove that Orr misled pensioners days before proposing cuts to pensions.

The Detroit News' Chad Livengood and Robert Snell report on the exchange that followed:

“Despite the implications, I wasn’t attempting to mislead anyone,” Orr testified Monday under questioning from city attorney Greg Shumaker.

Orr’s answer caused U.S. Bankruptcy Judge Steven Rhodes to interrupt with a follow-up question.

“Excuse me one second,” the judge said. “What would you say to that retiree now?”

“I would say his rights are in bankruptcy now,” Orr told the judge. “I would say his rights are subject to the supremacy clause of the U.S. Constitution.”

“That’s a bit different than sacrosanct, isn’t it?” Rhodes replied.

Orr continued to deny allegations that there was no attempt to negotiate with creditors "in good faith" prior to the city's bankruptcy filing. It's a pivotal point lawyers for the city's creditors are trying to prove. If they can do it, the city might not be eligible to reorganize under the protection of federal bankruptcy laws.

Orr ended his testimony this morning around 11 a.m.

Next to the witness stand, Snyder aide Richard Baird and former state treasurer Andy Dillon.

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Detroit bankruptcy eligibility trial resumes

"Detroit emergency manager Kevyn Orr is returning to court today as a witness in the sixth day of the city's bankruptcy trial.  Unions and pension funds are asking Judge Steven Rhodes to throw out Detroit's Chapter 9 filing or at least protect the pensions of city retirees. They accuse Orr and his staff of failing to engage in "good-faith" negotiations before the petition was filed in July, a key step under federal law. Orr says creditors had plenty of time to come up with proposals," the Associated Press reports.

Report says few 8 year olds have problem solving skills

A new report out this morning by the Annie E. Casey Foundation says only about one in three children 8 years old and younger have developed the necessary learning and problem solving skills they’ll need as adults.

Brad Ausmus new Detroit Tigers manager

"The Detroit Tigers have chosen Brad Ausmus as their new manager. The former catcher will replace Jim Leyland at the helm of the three-time defending AL Central champions," the Associated Press reports.

Steve Carmody/Michigan Radio

DETROIT (AP) - While a judge determines the future of Detroit's bankruptcy case, key people are meeting behind the scenes to try to reach deals.

Private mediation sessions are scheduled for Wednesday, at the same time the city tries to convince a judge that Detroit is eligible to fix its debts in bankruptcy court. The trial in front of Judge Steven Rhodes started on Oct. 23.

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