Judge Allows Detroit Bankruptcy to Go Forward

[onehandle]

Source: New York Times



DETROIT — The struggling metropolis of Detroit, overwhelmed by debt and groping for a path forward, on Tuesday became the largest American city ever to qualify for bankruptcy protection.

In his ruling, Judge Steven W. Rhodes of the United States Bankruptcy Court, found that Detroit was insolvent and that the pension checks of retirees could be cut during a bankruptcy proceeding, a crucial part of his decision.

Under the ruling, the vastly diminished city, once the nation’s fourth largest and the cradle of the American auto industry, will now be allowed to search for a way to pay off some portion of its debts and restore essential services to tolerable levels under court supervision. The goal, according to an emergency manager appointed by the state of Michigan, is to emerge next year from court protection with a formal plan for starting over.

“This once proud and prosperous city cannot pay its debts. It is insolvent. It’s eligible for bankruptcy,” Judge Rhodes said Tuesday. “But it also has an opportunity for a fresh start.”

Read more: http://www.nytimes.com/2013/12/04/us/detroit-bankruptcy-ruling.html

[BumRushDaShow]

1. Saw it on a Bloomberg Breaking banner too. nt

[greatlaurel]

2. This is really bad

Wish this looting of all the Michigan cities could be stopped. They are looters without breaking the windows. The GOP has declared war on the American public.

[rdking647]

4. 1 question

how can the city pay the pensions without cutting them? the simple fact is the city doesnt have the money...

[TBF]

25. The GOP has been aided a great deal

by other elites in this venture (as evidenced by other replies in this thread).

They call it "progress".

I call it another sickening display of the spoils of capitalism.

[Demeter]

3. Detroit should be suing Wall St for Fraudulent Financial Products

Not cutting retirees from their only source of income.

[rdking647]

5. and if the lose?

the city needs the money now. a lawsuit even if succesful takes a long time. how do you propose the city pay now?

[russspeakeasy]

6. + 1

[CoffeeCat]

7. So this frees Detroit from paying those pensions, correct?

Bankruptcy frees a person/entity from their financial obligations. It appears that pension payments are one of those obligations that Detroit will now be legally free to not pay.

Or am I missing something?

[rdking647]

8. not yet

now the city and its creditors will work out a way to pay off its debts. any cut to pensions will have to be approved by the court

[CoffeeCat]

9. I just read the article....

...and you are correct that the city is now forced to work with its creditors.

However, the bad news is that the court will not regulate this process. There are no laws that force the city to pay pensions. It just has to make a good-faith effort to pay "creditors."

This is the problem. Bankruptcy removes the legal obligation to pay those pensions.

Now, there really is nothing that ensures that those pensions will ever be paid. My guess is that these people will receive 20 percent of what they were promised--if they are lucky. And that's a big "if."

[SlipperySlope]

10. 16% is the plan (last I heard)

Nothing is final yet, but the city has already said they expect to pay unsecured creditors about 16 cents on the dollar.

[jeff47]

11. It's worse than that.

Many of these pensioners do not qualify for Social Security.

So this ruling means they go from having an income to not having an income. At all.

[SoapBox]

18. ...crimes against humanity.

[Festivito]

39. NOTE: Police and firefighters DID NOT contribute to Social Security.

They have NO safety net except for the state's rules precluding pension drops.

I don't know if other areas in Detroit government have the same situation. Maybe all of them for all I know now.

[yurbud]

12. there should be a law that pension obligations for public and private employees can't be gamed away

like this

[deancr]

14. There is a law in Michigan

The obligation to pay public pensions is written into the state constitution. Federal bankruptcy law has just been found to void the governor and his emergency manager's obligation to enforce the constitution. Why? A crisis!

Imagine the possible implications for public worker's pensions across the country. When they start throwing cops and firefighters on the trash heap, it's a new day.

[SoapBox]

17. And the Banksters will still call the shots AND get their money.

It's criminal.

[rdking647]

24. how do you pay

if you dont have the money?
how would you restructure the finances.
the city doesnt have the money to pay for basic services,pensions and debt service. thats a simple fact.

so what do you not pay?
a lot of the debt service is GO bonds whicg get the first slice of tax revenues. the only way not to pay them is thru bankruptcy. and in a bankruptcy GO bonds have a standing equal or greater than pensions

[Morganfleeman]

27. It's the Supremacy Clause at work

It doesn't matter what the State Constitution states in this respect. By definition Federal bankruptcy operates to void or modify contracts. There are some exceptions but municipal labor or pension contracts are not immune to change in bankruptcy. They are treated just as any other unsecured obligations and hence that's why the Court ruled this way. You would have to amend bankruptcy law to get a different result.

[deancr]

28. Or

The governor might have chosen to recognize that fixing the degradation of Detroit was a shared responsibility. That the 30-40 year process initiated with white flight from the city of both residents and businesses to the white suburban ring, taking the tax base with, and that racial animus played as much or more of Detroit's failing than did lack of good local governance or even the lessening of the auto industry.

Instead, he clearly set about directing an emergency manager to declare bankruptcy so to secure control of the city economy and what was left of value, such as the water department which supplies most of southeast michigan.

That he chose not to honor the state constitutional clause against undermining public pensions, he might have refused to declare bankruptcy, was more than oligarchic icing on the cake, It was a precedent he clearly wished to affirm.

[deancr]

29. played as much or more of a role in detroit's failing

I should have written.

I might add, I sure hope I'm wrong and that Detroit will again become a well functioning city that addresses the needs of all its citizens and not just those who hold a stake in Comerica Park and environs. Not a pattern pursued outside of the city since the day Coleman Young took office, but you never know.

[yurbud]

33. I forgot for a moment: when the rich wasn't something, laws don't matter

[NaturalHigh]

23. Absolutely.

In fact, this is important enough to deserve its own constitutional amendment.

[knic]

13. What factors contribute to this Detroit bankruptcy?

Is it that they don't know how to do math?

[hack89]

19. They have lost 60% of their population

since the 1960's - those that are left are overwhelmimgly poor. Their tax base is simply too small. Throw in corruption and poor financial choices and you have a real mess.

[navarth]

30. JOBS.

Globalization.

If the jobs hadn't been all sent overseas or to poaching low-wage states none of this would be happening.

[hack89]

32. Detroit's decline predates globalization

the 1967 riots were the tipping point - white flight to the suburbs took off and never stopped.

[knic]

34. If the tax base has shrunk

Why couldn't the city shrink the services and the budget accordingly?

If I have less income, I'm going to cut all my unnecessary expenditures and get into surivual mode.

Could we say this is the problem of leadership?

[hack89]

36. It didn't shrink in size geographically

Roads, sewers and other infrastructure didn't go sway.

There was also a strong tradition of political patronage so it was nearly impossible to shrink the public payroll.

[eggplant]

15. There goes the DIA.

Gonna be some wicked fine art fire sales.

[progressoid]

16. Yup. This is going to get ugly.

Detroit bankruptcy creditors ask judge to take steps toward sale of DIA treasures

A coalition of the largest creditors in Detroit’s bankruptcy is taking the first legal step toward pressuring the city to sell art at the Detroit Institute of Arts.

Three bond insurers, the city’s largest employee union and several European banks filed a motion in federal court this afternoon asking Judge Steven Rhodes to appoint a committee to oversee an independent evaluation of the market value of the multibillion-dollar city-owned collection at the DIA.

The motion formally takes the fight over the fate of the DIA into court for the first time. The filing suggests major creditors are unlikely to agree to any restructuring plan if they believe Detroit emergency manager Kevyn Orr is offering a low-ball figure for the value of the art. The move increases the chances that Rhodes will be forced to decide whether the art can legally be sold

http://www.freep.com/article/20131126/NEWS01/311260119/detroit-institute-of-arts-detroit-bankruptcy

[eggplant]

37. All things being equal...

...if they have to sell it, I would be ok with the employee union getting it.

Of course, I'd rather they bounce the damned governor out and undo all of his craziness. I'm sooooo glad I left 20+ years ago. Watching the decline is painful enough. I can't imagine still living there.

[alp227]

20. More coverage from the Detroit Free Press/Detroit News

Judge rules Detroit eligible for historic Chapter 9 bankruptcy, says pensions can be cut

Detroit Emergency Manager Kevyn Orr to present plan for cuts, financial reorganization

(Detroit Institute of Arts) DIA sales not ruled out, but Rhodes says selling of assets demands 'extreme care'

Supplement: 4 main rulings on eligibility criteria for Detroit bankruptcy case

Editorial: Bankruptcy eligibility ruling a victory for Detroiters

(All links above to the Free Press; the News articles follow)

Detroit eligible for bankruptcy

Next up for Detroit: Plan of adjustment to settle debts

MLive.com: Judge rules Detroit eligible for bankruptcy

[safeinOhio]

21. If all of the residents of Detroit decided to move,

in mass to Okland and Mcomb counties(republican), they'd find a way to bail out Detroit.

[mitty14u2]

22. How CRAZY are Republicans/Greedy? Michigan-Answers ?

Detroit Creditors Push for a Price on City's Art

Creditors Ask Court to Create Group to Establish How Best to Value Collection

http://online.wsj.com/news/articles/SB10001424052702303281504579222371358467800

This is what they did in one town, Sold off City Park to Privatize Golf Corse……….By the People Loose, Corporations Win.

Heart of Michigan park sacrificed for private golf course

Benton Harbor, Michigan. In 2010 the Republicans were able to gain control of the governorship and legislature in Michigan. They have used that majority to pass a budget bill which allows the state government to literally take control of the local government within the state.

Under the bill, if the state determines a town is in a “financial emergency” they can then appoint a financial manager over the town with near absolute power over local officials. The state of Michigan also now has the power to simply abolish a town which it determines is “failing.”

The first town to be put under state control by Republican Governor Rick Snyder was Benton Harbor, with possibly tragic results for the town’s residents.

http://www.examiner.com/article/maddow-accuses-gop-of-bringing-new-era-of-big-government-video

Financial Manager are a New Scheme Thought up by Some Right Wing Think Tank to throw Democracy out the Window, No GOP Coup? Just keep your head in the preverbal Sand!

[mitty14u2]

26. "Snyder’s emergency management" Detroit Bankruptcy

Snyder’s emergency management


November 4, 2013


http://www.snyderfails.org/2013/11/snyders-emergency-management/

Emergency Managers was repealed, then re-worded and installed without vote. Q) Mom Dad what was Democracy?

[navarth]

31. I think they're going after the Water Works more than anything.

Why do I think so?

1. The suburbs have been complaining about not having control of the water for decades.

2. We hear NOTHING about it in the 'news'. That is an ominous silence.


I believe they'll let us keep most of the DIA and take over the Water Works.

[philosslayer]

35. You think the horseshoer will get to keep his job if this happens?

http://www.michigancapitolconfidential.com/17404

[navarth]

40. You post a link from the Mackinac Center???

Just who are you?

But to respond: IF the story is true as portrayed by this highly biased 'news' site, then I would say the horseshoer should be transferred to the mounted police where they actually use horses.

This picture shows him shoing a horse. If they don't have horses in the water department (and I can't imagine why they would) then whose horse is he shoing?

[philosslayer]

41. I have no idea what the Mackinac Center is

I just thought it was an interesting story. Here's a link from MSN. Feel better now?

http://now.msn.com/the-city-of-detroit-still-has-a-horseshoer-on-staff

[navarth]

42. "Feel better now?"

No not really. This 'MSN' link refers to the Mackinaw Center as it's source.

[philosslayer]

43. It's a news story

The Department of Water in the City of Detroit has a horseshoer, yet no horses. I have no idea what any of that has to do with the Mackinaw Center, and I'm not going to look up every two big organization that has a link to news story.

Perhaps you'd be well advised to validate news stories instead of going on troll hunts.

[navarth]

44. Like Fox News is a news story.

I read it. I could see the inherent BS they put in, as expected.

But maybe you're not a troll; I have no way of knowing. If you're not, we don't have a problem.

Beyond that, my opinion about the horseshoer has already been stated.

[quadrature]

38. simple solution...unincorporate..nt