Detroit bankruptcy

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.

User: Brother O'Mara / flickr

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.

Detroit Skyline
Dave Linabury / Flickr

This Week in Review Rina Miller and Jack Lessenberry discuss next week's elections, the Detroit bankruptcy eligibility trial and the accusation by a Senator from Oklahoma that Isle Royale is wasting money and is not worthy of preservation.

Bob Jagendorf / Flickr

This week, Judge Steven Rhodes has been hearing testimony to decide whether Detroit is eligible for Chapter 9 bankruptcy protection. Both Governor Rick Snyder and Detroit Emergency Manager Kevyn Orr have testified in the case. Michigan Radio’s Sarah Cwiek has been covering the hearings and she joins us to talk about the atmosphere in the courtroom.

Listen to the full interview above.

LiveStream

Both Detroit Emergency Manager Kevyn Orr and Governor Snyder testified this week in the trial that will decide whether Detroit is eligible for Chapter 9 bankruptcy protection.

Facing hours of pointed questions from lawyers for city unions, retirees, and pension funds, both Snyder and Orr said that bankruptcy wasn’t a foregone conclusion for Detroit.

But both also insisted the city was clearly insolvent, creditor talks had broken down into multiple lawsuits, and Orr had to move quickly.

“It was somewhat shocking how dire it was,” Orr testified.

This week, Bankruptcy Judge Steven Rhodes is hearing arguments on whether the city of Detroit is eligible for Chapter 9 bankruptcy protection. Both Governor Snyder and Detroit Emergency Manger Kevyn Orr have testified. They argue that bankruptcy is Detroit’s only path to solvency.

John Pottow weighed in on the matter on today's Stateside program. Pottow is professor of law at the University of Michigan who specializes in bankruptcy and consumer protection.

"I think the hardest issue about this is this Michigan constitutional provision about protecting the pensions," Pottow said. "This gets to what's animating the objectors and the unions is, why would the governor want to rush Detroit into bankruptcy? It's not what people generally clamor toward. And their concern is that because of this protection the workers have under the state constitution, that the governor might be trying to use the federal bankruptcy law as a way to get around the Michigan constitution."

Listen to the full interview above.

screen grab / NBC Video

It's Day 5 of the Detroit bankruptcy trial and the man at the center of the bankruptcy filing took the stand for the third time.

Detroit Emergency Manager Kevyn Orr filed the bankruptcy paperwork with the court last July.

Now Bankruptcy Judge Steven Rhodes will decide whether the city can be protected from creditors by entering into Chapter 9 bankruptcy. He's expected to make his decision sometime in mid-November.

Joy VanBuhler / Flickr

U.S. Bankruptcy Judge Steven Rhodes is presiding over the fourth day of testimony in the Detroit bankruptcy case.

At issue...

  1. Is it true that Detroit can no longer pay its bills?
  2. Did city leaders negotiate with creditors "in good faith" before filing for bankruptcy protection?

Two of the main players in the bankruptcy filing are in court today.

Detroit's state-appointed emergency manager Kevyn Orr took the stand last Friday and again this morning.

Detroit Skyline
Dave Linabury / Flickr

With the bankruptcy trial in full swing, we thought we'd share the following facts with you about the Detroit bankruptcy case.

 

  • State declares Detroit is in a “financial emergency” on March 1, 2013

  • Kevyn Orr appointed as Detroit’s emergency manager on March 14, 2013

  • City files for Chapter 9 bankruptcy on July 18, 2013

Steve Carmody/Michigan Radio

DETROIT (AP) - The Detroit City Council has decided not to push an alternative to a $350 million loan designed to help the city pay off some of its massive pension debt.

Council members on Friday discussed the competing plan to the post-bankruptcy petition financial proposal engineered by state-appointed emergency manager Kevyn Orr.

About $230 million from Barclays would be used to fully pay off a complicated pension debt deal involving two major creditors. The rest would be used to improve basic city services.

Gerri Trager / Flickr

Update 4:25 p.m.

Emergency manager Kevyn Orr has taken the stand in Detroit bankruptcy eligibility trial, for what's likely to be a brief bit of testimony before court breaks for the weekend.

The court confirmed that Governor Snyder will take the stand at 1 p.m. on Monday, regardless of whether Orr is finished testifying.

Orr follows Detroit Police Chief James Craig, who testified about the poor state of police service in Detroit when he took over the job in July 2013.

He called Detroit "the most violent city I've ever worked in" (he's also worked for police departments in Los Angeles and Cincinnati).

He said the city needs to take "bold action" to rectify its fiscal problems, but acknowledged he was "concerned" about "hiring and retention issues" if Detroit is allowed to slash pension benefits in bankruptcy.

1:11 p.m.

At issue is whether the state (mostly Gov. Rick Snyder) and city​ leaders (mostly Kevyn Orr) truly negotiated "in good faith" with Detroit's creditors.

Those who stand to lose a lot (city union workers and retired pensioners, among many others) are arguing that bankruptcy was the goal all along - that there was no "good faith" bargaining going on.

We're in Day 3 of hearings in front of the man who will ultimately decide whether Detroit will become the largest city in U.S. history to go bankrupt.

We're not expected to get a ruling from U.S. Bankruptcy Judge Steven Rhodes until mid-November.

This morning there was testimony from Kenneth Buckfire, an investment banker who worked with the city of Detroit. Buckfire was questioned about the timing of his negotiations with Gov. Snyder and the city over the city's insolvency.

A new study found that students enrolled in online charter schools are not performing as well as students in traditional brick and mortar schools. At the same time the number of virtual schools is growing. On today's show, we talked about the big business of online charter schools.

And, how do you talk about being gay and Christian? And how should we be talking about it? We spoke to the founder of the Gay Christian Network to learn more.

And, could eating local save energy and help the planet? We took a closer look at the impact of the local food movement.

Also, Jen Guerra from Michigan Radio’s State of Opportunity project joined us to give a preview of her upcoming documentary, “The Education Gap.”

First on the show, is Detroit really broke?

That’s the question before Federal Bankruptcy Judge Steven Rhodes as Detroit’s bankruptcy eligibility trial began today. His ruling could open the door for the City of Detroit blowing up billions of dollars in debt and liabilities.

As has been the case ever since the bankruptcy filing on July 18th, this is all being closely watched from coast to coast. History is being written in Judge Rhodes' courtroom.

Daniel Howes, Detroit News Business Columnist, and the former Chief of Communications for the City of Detroit, Karen Dumas, joined us today to talk about what this trial means and what we might see.

Peter Martorano / Flickr

Is Detroit really broke?

That’s the question before Federal Bankruptcy Judge Steven Rhodes as Detroit’s bankruptcy eligibility trial began today. His ruling could open the door for the City of Detroit blowing up billions of dollars in debt and liabilities.

As has been the case ever since the bankruptcy filing on July 18th, this is all being closely watched from coast to coast. History is being written in Judge Rhodes' courtroom.

Daniel Howes, Detroit News Business Columnist, and the former Chief of Communications for the City of Detroit, Karen Dumas, joined us today to talk about what this trial means and what we might see.

Listen to the full interview above.

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

Detroit is NOT in bankruptcy. Not yet, anyway.

That's what the bankruptcy hearing, which started today, is all about.

The federal bankruptcy judge will decide whether the city is allowed to protect itself from close to 100,000 creditors under Chapter 9 bankruptcy laws.

We found out this morning that Michigan Gov. Rick Snyder, the man who ultimately signed off on Detroit's bankruptcy filing, will testify in the Detroit bankruptcy trial on Monday.

Unions had served Snyder with a subpoena, but his live testimony appeared to be an unsettled issue earlier this week.

Gov. Snyder's lawyer argued that the Snyder's recent three-hour deposition should be enough.

But now his counsel says the governor wants to cooperate and will be available Monday afternoon.

Unions and pension funds want to question Snyder about approving Detroit's bankruptcy filing in July as well as other issues related to the case.

They will try to prove to the bankruptcy judge that Gov. Snyder and Detroit's emergency manager Kevyn Orr had bankruptcy in mind all along - that they did not negotiate in good faith with the creditors ahead of time.

Michigan Radio's Sarah Cwiek is live tweeting from today's hearing. Lawyers for the city have already argued in favor of bankruptcy this morning. Now it's time for those opposed to bankruptcy to argue. Here's how Cwiek sums up what their arguments will be:

 

 

Well, today is the day that the City of Detroit goes to court. Bankruptcy court, that is. Not to settle the final details of what will happen, but to ask the judge to allow it to declare bankruptcy.

This has been going on so long now that there’s a tendency to take Detroit bankruptcy as an established fact. In fact, all that has happened is that the Emergency Manager, Kevyn Orr, filed a petition in July asking to be allowed to declare bankruptcy. Since then, we’ve been treated to a long series of revelations that make bankruptcy appear the only option.

Detroit has close to $20 billion dollars in unfunded liabilities, and next to no assets. It wouldn’t make much of a dent if they sold the entire collection of the Detroit Institute of Arts, and then sold the building to a billionaire who wanted a mausoleum.

Bob Jagendorf / Flickr

In this Week in Michigan Politics, Christina Shockley and Jack Lessenberry discuss Detroit's bankruptcy eligibility trial, Governor Snyder's NERD fund, and new proposed fracking rules.

A trial to determine Detroit’s fate in municipal bankruptcy starts Wednesday.

Judge Steven Rhodes will hear arguments from city lawyers about why Detroit qualifies for Chapter 9 protection.

University of Michigan law professor and bankruptcy expert John Pottow says some city creditors will argue that Detroit’s bankruptcy filing was pre-determined--and there was no good-faith bargaining process, as the federal bankruptcy code requires.

User: Brother O'Mara / flickr

Bankruptcy eligibility trial begins today

"A trial to determine Detroit’s fate in municipal bankruptcy starts today. Judge Steven Rhodes will hear arguments about whether the city qualifies for Chapter Nine protection," Sarah Cwiek reports.

Judge says Detroit EM candidate names  should be revealed

"A Wayne County judge has ruled that state officials must turn over a list of possible candidates for the Detroit emergency manager job," Cwiek reports. This comes after a union activist filed a lawsuit saying the state violated the Open Meeting Act when it appointed Detroit's emergency manager Kevyn Orr.

DEQ proposes new rules for fracking

The Department of Environmental Quality has proposed new rules for fracking in Michigan. "The rules will require disclosure of chemicals used by developers, and make it easier for people to track where “fracking” is occurring," Rick Pluta reports

State officials must turn over the names of all candidates considered for Detroit’s emergency manager job.

A Wayne County Circuit judge court ordered that information be made public Tuesday.

User: Brother O'Mara / Flickr

Gov. Snyder shuts down NERD fund

"Governor Rick Snyder’s controversial NERD Fund will be shut down this week and replaced. Its official name is the New Energy to Reinvent and Diversify Fund. Governor Snyder used the fund to pick up costs he says should not be paid by taxpayers," Rick Pluta reports.

Highland Park could have an Emergency Manager soon

A state board has determined that the city of Highland Park has probable financial distress. Gov. Rick Snyder will next appoint a review team which could lead to an appointment of an emergency manager. According the Associated Press, "The Local Emergency Financial Assistance Loan Board also determined there is no probable financial distress in Ecorse Public Schools. A similar hearing is scheduled Wednesday for Royal Oak Township."

Detroit City Council rejects loan deal from EM

"The Detroit City Council has rejected a proposed $350 million loan deal. Emergency manager Kevyn Orr . . . planned to use most of the $ 350 million to pay off two banks. That’s controversial because he’s proposed much steeper cuts for other Detroit creditors. Bankruptcy court Judge Steven Rhodes will have to sign off on the deal," Sarah Cwiek reports.

The Detroit City Council has rejected a $350 million loan deal secured by Emergency Manager Kevyn Orr.

Orr announced the deal with the British financial giant Barclays earlier this month.

The plan was to use most of the money—about $230 million—to pay off two banks who profited from a bad interest rate swaps deal Detroit made on some pension debt years ago.

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