Wow. I guess we were in a "not if, but when" holding pattern, but I didn't expect it so soon.
http://www.freep.com/article/20130718/NEWS01/307180107/Detroit-prepares-file-bankruptcy-soon-Friday
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Wow. I guess we were in a "not if, but when" holding pattern, but I didn't expect it so soon.
http://www.freep.com/article/20130718/NEWS01/307180107/Detroit-prepares-file-bankruptcy-soon-Friday
Yeah, they have to do the whole process before the law is found unconstitutional. ;)
I wonder what the pension folks will get in the end. You have to assume that the city's contribution to health care will be either wiped out or reduced to a small subsidy. If they get 30-50 cents on the dollar for the pension part, that's only something like 15-30 cents on the dollar for the combined pension plus health care.
Facing that reality, Orr's "opening offer" of about 10 cents on the dollar doesn't seem that bad, provided he would have been willing to negotiate up substantially, to something like 40 cents.
It's really just stunning to actually see "in print", regardless of where you fall on the issue, though.
That's one of the reasons [[the federal lawsuits to repeal PA 436 will both be heard next month, and of course since Snyder thinks PA 436 is the best way to expedite the bankruptcy process, we can't risk a federal judge ruling it unconstitutional prior to the bankruptcy filing). but I think the Pensioners' lawsuit to block the pension cuts is what ultimately rushed the pull of the trigger
My question is WHEN will the residents get our "upgraded" city services? Will it kick in after the bankruptcy is done and over with or can we expect some changes sooner as outlined in the plan Orr presented?
A bankruptcy judge is going to wipe out the city's current obligations to the pensions and future payments going forward? No way that's going to happen. Water and sewer debt wiped out when there's revenue coming in? Not going to happen. All this looks very clean up front. It's going to get very messy and I won't be surprised if Mr. Orr leaves a giant mess behind just as Robert Bobb did at DPS.
1. Robert Bobb didn't attempt to fix DPS' finances in the same way that Orr has attempted to fix Detroit's finances. Instead of going to DPS' creditors with a restructuring plan, Bobb imposed cuts, cuts and more cuts on the students and teachers. All Roberts has done differently from Bobb to attempt to fix DPS' finances was privatize the operating costs of those 15 DPS schools.
2. The purpose of Chapter 9 bankruptcy is not to wipe out debt, but restructure it. Since the creditors won't accept haircuts voluntarily, the haircuts will be imposed on them by a bankruptcy judge.
Next thing, HALIBUT will be filing
just for posterity, this thread's original title was COD will file for bankruptcy
now at least the lame joke has context
kevin orr is a bankruptcy guy
kevin orr's firm is a bankruptcy firm
we knew this on day one. i'm surprised they didnt say the b-word until now.
I'm confused on this, too. Orr threatened bankruptcy in his first public address and first media interviews. He mentioned it several times through the process, even stating that the week of July 15 was going to be the week when the decision was finally made.
The idea was to see if they could settle up [[or partially settle up) as much of a deal as possible to minimize the time and expense in bankruptcy court which would be inevitable if too many creditors rejected the deal.
What I think is fascinating is the number of creditors who haven't outright rejected the offer. They are doing and saying a lot of things: filing lawsuits, writing articles stating that the offers are "unfair", hosting press conferences. But the one thing all the creditors are afraid to do is say, "no deal".
It does have me wonder what is actually going on behind the scenes there.
Time to update the title of this thread...
Quote:
Detroit files for Chapter 9 bankruptcy amid staggering debts
http://www.freep.com/article/20130718/NEWS01/307180107/
Seems like tomorrow is here today. http://www.freep.com/article/2013071...rgency-manager
Maybe the erroneous reporting is because he just "said" it instead of declaring it?
http://www.youtube.com/watch?v=hiCilTzhXrA
This was always the likeliest path. Now it is up to Orr to sell a plan to the judge, whoever that turns out to be.
Nothing to see here... go back to work....
The governor flat out lied and said Kevyn Orr hadn't recommended bankruptcy to him. But his letter says Orr recommended it on July 16th.
Anyway, the battle now moves in part to whether a plan that proposes to cut pensions will be considered a legal plan. The bankruptcy code says the plan cannot violate law. It does not say what law. Federal pension rules [[ERISA) do not apply to public pensions, so it is not clear that there is any applicable federal law to trump the state law. At least none I have uncovered yet.
I don't know a damn thing about bankruptcy law. I'm not well-versed on the subject of government finance. I pay about as much attention to politics as I do pine-car derby racing. But I know one thing: Little people like you and me are going to get screwed in this bankruptcy deal. Why? Because we always do. Always. When's the last time some huge paradigm shift initiated by a government entity actually benefitted us? Good luck waiting for city services to improve. Call me when it happens. Maybe the DDOT bus will have gotten here by then.
This is making international news. It's the top story at cbcnews.ca right now.
Local ABC affiliate here in San Diego has a small online article.
http://www.10news.com/news/u-s-world...ruptcy07182013
And nbcnews.com is carrying a story as well.
http://www.nbcnews.com/business/detr...tcy-6C10678946
Also the top story at BBC News.
http://www.bbc.com/news/
Section 24, Constitution of the State of Michigan: "The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall be a contractural obligation thereof which shall not be diminished or impaired thereby."
Strikes me that if Detroit can't fund the pension systems, it becomes a state obligation. But I'm sure that will be in the courts, too.
Well this is great news for many cities. They now know they can make unlimited promises. And the bill will be paid. No strings attached.
Cities better make their promises fast. Before the adults get home.
Newsflash - that's been part of the Michigan Constitution since at least the 1960s. If lawmakers don't want the state to be on the hook for pension benefits, how about they pass a law that says "municipalities can't skip pension contributions in years when the market does well". Detroit, and other communities, were able to skip pension contributions when the times were good. Now they want to skip payments when times are bad. The system can't work that way.
KY jelly stock went up. Bend over everyone.
Wow. They really did it. I've seen a lot of shit happen and go down over the many years, but this one just kinda seems to me to be the end all to... end all. My wonderful City is now much like many of us have been in the past - down and out... broke.... can't pay bills... this might well possibly be the saddest event I've ever seen here. Of course there is optimism as well... a new generation will evolve out of the mess of the past 45 years or so. Detroiters will innovate, adapt, and work twice as hard to protect this fair land. With tongue firmly planted in cheek, I would really like to thank all of the corrupt, greedy, lazy, and above all - the entitlement seekers who have, over all these years really thought that Detroit was just SOOOO special, a "jewel within a jewel" in fact, that never ever would the money run out. Now... all the paper work is in order... the documents have been signed... brief cases and PDA's are locked... lots of "cover your own ass" is set up.... and we'll let the court decide. In Obama's famous campaign stop in Detroit back in, ummmm, 2008 or whenever, he actually sang a couple lines from "Chain of Fools". My belief is that he was not singing it WITH Detroiters, but AT Detroiters. It all boils back down a very simple question - who gonna pay the bills? YOU.http://www.youtube.com/watch?v=gdcvdigOdjI
Attachment 20871 Speramus Meliora; Resurget Cineribus
Detroit is broke, everyone. Blame Coleman Young, Kwame Kilpatrick and Dave Bing!
In America, Fewer black dominant cities will blamed first for their corruption.
The bankruptcy judge from somewheresville will start an estate sale. It's creditors might buy some blighted ghetto and sweep out the bums, yahoos, and property tax cheats.
White folks have finally reclaim Detroit by using politics and Wall Street.
It will all be decided by what side of the bed the bankruptcy judge wakes up on. Orr knew Detroit was headed for bankruptcy anyway. All that postering about trying to work out a deal was nothing but window dressing. He and others actually believes federal laws will ultimately trump the state constitution that protects pensions. It really is no way around it. Sadly, pensioners are going to lose some benefits and cuts to their pension. The debt is astronomical.
hey, the people -white and black- of michigan voted down the emergency manager law.
dont blame all us whites for the republicans in lansing screwing over the voters intent.
so the zoo's up for sale? the city parks? belel isle?
white guys gonna put a dumb golf course on belle isle?
What is the likelihood that the federal bankruptcy court will accept the petition from Gov. Snyder, Kevyn Orr and the city of Detroit for bankruptcy? The city of Harrisburgh was, arguably, in more percarious financial status than Detroit and sought federal bankruptcy. The bankruptcy judge, as I understand it, turned down their request for federal bankruptcy.
In the Detroit litigation, the pensioners and the bond holders could argue that the city of Detroit has many assets that could easily be liquidated for
cash including some property, the water and sewerage system, the art in the DIA and the historic cars owned by the city's Detroit Historical Museum.
Will it be easy for the Governor and the Emergency Manager to convince
a judge that the city qualified for Chapter 9 bankruptcy? I suspect that the
Emergency Manager knows this terrain very well and would not go forward
unless he were sure of winning in the forthcoming litigation.
Per Wikipedia, the reason Harrisburg's bankruptcy petition was denied is because all branches of government didn't authorize the filing of the petition. That of course doesn't apply to Detroit [[only Orr and Snyder had to authorize it under PA 436). And quite frankly, I see no reason why Detroit's petition would be denied.
So apparently, an emergency hearing was scheduled today at 4:00 PM today to grant the pensioners' request to place a temporary restraining order on a bankruptcy filing.
Essentially, Snyder's attorney asked everyone to delay the start of the case for 5 minutes, and everyone agreed. Within that 5 minutes, the bankruptcy petition was filed. The judge, who was also surprised, proceeded to inform the parties in the courtroom that the petition was filed at 4:06 PM.
http://www.freep.com/article/2013071...pension-ingham
I really liked the New York Times article on the subject. Ignoring the fact that they reprinted about 4 graphs in the middle of the story, it takes a reletively detatched view of the subject.
http://www.nytimes.com/2013/07/19/us...nted=1&_r=0&hp
You made the paper in Australia too:
http://www.theage.com.au/business/wo...719-2q8cv.html
Copy and paste of The NY Times, but anyway....
Cheers
"Who said anything about water and sewer debt getting wiped out? I think I'm confused."
Didn't you hear? Detroit owes $20 billion in debt and bankruptcy is required to wipe out that debt. What's that you say? The water and sewer debt doesn't count? But Orr and Snyder have told the citizens of Detroit and Michigan that it does.
From the Detroit News:
http://www.freep.com/article/2013071...-things-expectQuote:
...An automatic stay will be issued on most of Detroit’s bills, including unsecured debts, said Ken Schneider, a bankruptcy attorney with Detroit-based Schneider Miller PC. The city will continue to pay secured creditors, including water and sewer bondholders, who have the right to seize city assets if Detroit fails to pay....
"Apparently we have two different understandings of bankruptcy."
Snyder and Orr are trying to have it both ways. They are playing fast and loose with the facts. The water and sewer debt is a perfect example. They are lumping it in with the rest of the city's obligations even though they know that those debts are secured by the payments by the users of the system and there's no way that a bankruptcy judge is going to order those to be reduced. Likewise, they claim that the city has reached its statutory tax limit and can't repay its debts. But they know or should know, that the tax levies for GO bonds aren't bound by the statutory tax limits and that there's no way the city can argue that there's no revenue to repay those GO bonds.
In my opinion, we all knew this was inevitable. After Detroit goes through the bankruptcy process what will life be like after we come out of it?
I personally think things will be the same as they always were and we'll slowly slide back into the same routine and conditions that we're trying to come out of. In order to see a drastic change, crime will have to be reduced noticeably, population will have to increase dramatically, we'll need a "competent" new mayor and council, we'll still have to rebuild/upgrade our infrastructure, we'll need to be open to changing our suicidal traditions, behaviors, mind sets, habits and laws that drove us to this point, and then pray that we can barrow money [[at a decent interest rate) to do these things and much more. Once the dust has settled can we fix a broken Detroit? Bankruptcy is step number 1. Step number 2 is to maintain and not regress. Not spending significantly more than we're taking in.
The cities main priority should be to get hundreds of thousands of tax payers to come into the city. How we do this is the big question?
That's just my honest assessment.
There's a lot of legalese in this salad.
Accrued... so its only accrued benefits -- not anything granted -- just accrued.
Contractual Obligation -- so its equivalent to a contractual obligation -- don't those get altered in bankruptcy?
Not diminised or impaired thereby -- what? Thereby what? So maybe the State can't alter the contract -- but maybe the federal judge can -- because he's not part of the State Constitution.
Brace yourselves while the brigade of lawyers fight this out. And remember retirees, as lawyers make more money -- there'll be less to pay you with. You better hope that bankruptcy judge sees it your way. Otherwise Orr might've been a better bet.
^^^^ 'Speramus Meliora; Resurget Cineribus [[Latin: We Hope For Better Things; It Shall Rise From the Ashes).
http://en.wikipedia.org/wiki/Detroit
Several people have referenced the Stockton, CA bankruptcy as proof the pension plans can be busted in bankruptcy. But in Stockton, the city had consistently favored the pension plan over other creditors going so far as to continue making payments while stiffing other creditors. But in Detroit, the city's largest outstanding debts have been to the pension plans and the city has effectively been stiffing the pension plans while continuing to pay other creditors. Sounds like the pension systems in Detroit are in a much stronger position to argue against the city's treatment pre-bankruptcy as compared to the pension system in California.
The other disingenuous aspect of the Orr/Snyder position is that they imply that if the city was able to offload this debt, it would allow it to spend tax dollars on city services. But much of those tax dollars only being collected because they are paying specific obligations. Once those debts are paid off, the city has no legal authority to collect those tax dollars for any other purposes. Furthermore, while in and once it exists bankruptcy, the city ability to borrow to pay for capital needs, infrastructure improvements, etc. will likely be severely constrained. That will force the city to pay for those on a pay-as-you-go basis, further reducing the tax dollars going towards services or resulting in another cycle of disinvestment in the city's infrastructure.
^^ I don't think it really matters. Besides, Detroit's debt is eons the size of Stockton.
What can be learned from all of this? Are the Big Three giving back their government bail-out money now that Detroit has closed up shop for good? Look at the reinvigoration of the Book Cadillac building when Westin Hotels purchased and revamped it. How can that be done city-wide? Was the main problem in Detroit the lack of a tax-base? How much can poor and under-employed people pay in taxes? And how many privileged people [[who can afford to pay taxes) are not paying them?
Oh, give me a break.
What political faction has an organization called By Any Means Necessary -- that clearly states in its name how it will behave -- or not behave.
You think Lyndon Johnson played by the rule books?
The game isn't pretty today. And wasn't under Kwame either.
Both sides play the same game. You just notice it more when done by others.
Oh, and its not polite to call those who disagree with you obscene names.
So...the city of Detroit filed for Chapter 9 bankruptcy. As a downtown resident since 1999, here's my take [[opinions are like assholes, but here goes anyway): BE PREPARED - THIS IS THE FIRST OF MANY MUNICIPAL BANKRUPTCIES COMING DOWN THE PIPE!! Not like this is the first time either. New York City for example in the early 80's was in this same situation, among countless other cities over the years.
If you don't think the whole country is riveted as to how this plays out, you're crazy. It's time for honest conversation in the United States about the role of government, Federal, State, & Local. We have WAYYYYYY TOO MUCH GOVERNMENT right now. Need to get out of that business.
I don't lean Republican like this paper does, however, this is one of the most insightful articles I've ever read about the role of government in our lives. We can do well to emulate some or all of this. Time to reduce the governmental footprint in the United States. Question is...will everyone agree that this is the way to go?
http://www.hillsdale.edu/news/imprim...=2004&month=04
I don't disagree with bankruptcy. Things have been inevitably heading that way for a while. But let the damn process play out. First we have to have this apparently useless "manager" foisted on us [[even though we, and everyone else in the state, voted against it twice), when we could have just gone into bankruptcy without all the shouting and power grabbing. And now, rather than straight-up arguing their case and defending themselves before a judge in a hearing against the claims of the main creditors - the people who actually worked for the city - they have to pull some backhanded "gotcha" crap. That's just plain assholish behavior, and I don't really know another word for it. It reminds me more than a little of the same way they railroaded so-called right-to-work through, and, it seems to me, was done this way for much the same reasons.
I have no idea what you're going on about though with the references to Kwame Kilpatrick, Lyndon Johnson, and [[I think) Malcom X.
Asshole doesn't seem obscene. Bur then of course, I live in the city, so I guess it makes me "street".
When the auto industry got "bailed out" the Mayor said he saved Detroit. But what did the bailout do to change the auto makers? They put cars together with parts from 3rd world countries, NOT the USA. They took bailout money and moved plants to Mexico. I've worked in GM & Chrysler dealerships off and on since the 90's, and I rarely to never see a part come out of the distribution centers that says MADE IN USA on it.
Even the cars assembled in the USA are put together with cheap parts from 3rd world countries. Some of these cars, like the Cadillacs, boast new technology, backup cameras, and other nifty gadgets in attempt to stay ahead of the competition.. but what good is a gadget made by little Chinese or Indonesian kids that breaks?
When France did their automotive bailout about the same time, one of the stipulations of the bailout was the automakers keep their plants in-country. The USA wasn't intelligent enough to do the same thing.
So here we have what was once the richest city in the world filing bankruptcy, while Dubai is booming. Detroit sits in a state full of shale, coal and natural gas. But Dubai and other countries have Governments that are interested in prosperity. Go figure.
As Detroit crumbles lets send a couple more billion to Egypt and other countries that hate us. Let's rebuild Iraq and Afghanistan. Let's give electricity to South Africa.
Lets ignore the more than 1 million homeless here in our own country.
Lets ignore our own cities and our own people.
Detroit is a model for the decline of the rest of the country.
Every year the United States gets weaker and China gets stronger.
It's not a matter of IF the United States is going to fall, it's WHEN.
The question is : will it be at our own hands or at the hands of a foreign enemy.. or both?
DETROIT:
http://moelane.com/wp-content/upload...01/Detroit.jpg
DUBAI:
http://3.bp.blogspot.com/-4H_YOssXtV...t+in+Dubai.jpg
WHY? Because we let it happen.
You have to have little understanding of bankruptcy and the situation to make this assertion.
First of all, we would not ever just waltz into bankruptcy without an EM forcing our hand. Aside from the obvious fact that we've been broke for a long time and never entered bankruptcy, the pensioners are fighting BK tooth and nail right now. Why? Because they lose their state protections in federal bankruptcy. The pensions would never willingly enter bankruptcy. Their only shot would be to get a sweetheart settlement outside of bankruptcy court - it's naive to think they'd agree to give up their state protections.
Second, as a resident, I'm glad Orr is here. He is the first and only person in municipal bankruptcy to make the argument that general obligation bondholders are unsecured creditors. Ever. That is sending shockwaves across the municipal finance scene - Orr is screwing over bondholders to get more money for Detroiters. And by taking more money from bondholders, he's actually giving more space for pensioners to get some money. Without Orr's novel legal arguments, pensioners would automatically get in line behind both secured creditors and general obligation bondholders. With Orr's position, they and general obligation bondholders are on the same footing.
Not to mention, that because we opted for the best in the business [[Orr and Jones Day), we are entering bankruptcy with a comprehensive pre-BK plan, unlike Stockton or Jefferson Co, Alabama. This plan both protects Detroiters and speeds up the process, which is why we might be out of BK in a year while Stockton hasn't even ruled on eligibility a year after filing. The Free Press explains it in full detail here.
Orr isn't some friends-and-family appointee like Detroit is used to seeing. He's top-notch and I'm glad he's on my side. Makes me sick to see the way Detroit was outhustled and outlawyered and outsmarted on so many of these financial deals that screwed the city over. Nice to finally be the savvy one.
I think the same about the pensioners going to Ingham County to get a restraining order against the city to prevent it from filing for bankruptcy. They have an opportunity to argue in the eligibility hearing if they feel Detroit shouldn't enter bankruptcy. The TRO was unnecessary. Just running up legal fees for both sides in a futile attempt to delay the "inevitable."
is snyder going to fix the problem of cities being able to borrow money forever?
will the legislature regulate banks who give loans to cities over and over again until they go tits up and the bank siphons loan payments from the state?
i mean, you can send detroit to bankruptcy, but that doesnt fix the underlying problem.
who am i kidding? the banks did the whole mortgage world-wide great depression and they didnt get any new regulations or rules. entire countries were levelled economically. nothing changes.
"Without Orr's novel legal arguments, pensioners would automatically get in line behind both secured creditors and general obligation bondholders. With Orr's position, they and general obligation bondholders are on the same footing."
Interesting theory. But it's not backed up by the reality that the secured creditors of enterprise funds can depend on the revenues from those funds and the GO bondholders can go to court and force the city to levy the tax rate necessary to pay off those bonds. In neither case can the city argue that there's "no money" when there's both money and a legal mechanism to pay the debts.
No, you can't legislate everything you're asking for; banks find their way around it anyways by being creative. But Orr pushing the GO bondholders to unsecured status takes care of that for us. You'll likely never see GO bonds freely given like they are now [[if Orr is successful in his argument). It's analogous to allowing people to discharge student loans; banks wouldn't prey upon 18 year old freshman to the extent they do now if they actually had some risk in doing so.
"You'll likely never see GO bonds freely given like they are now [[if Orr is successful in his argument)."
GO bonds aren't given out freely. They have to be approved by the elected officials and voters. The only thing it accomplishes it making it that much more expensive for future bond obligations, which takes money out of the pocket of every taxpayer in Michigan and puts it into the pockets of Wall Street financial firms.
They are given out freely from the bondholders side, which was my implication. And it doesn't always require approval of voters.
It does make it more expensive for future GENERAL obligation bonds. Perhaps municipalities should be more careful with those anyways...there are safer, perhaps more responsible methods of municipal finance than virtually unending access to GO bonds.
Assuming that city workers would have their pensions slashed under bankruptcy, would they revert back to their original pensions once Detroit came out of bankruptcy?
As another lawyer, I really want to expand upon TexasT's point about us finally getting the best.
For years, we were screwed as the best in the business swooped in from NY and Chicago and went to town on our finance and legal staff at the city. While these folks may be good at their jobs, they are not specialists, and certainly not to the extent of the aces that structure deals every day as a living.
But now the shoe is on the other foot. The pension boards tried shady tactics to stall -- and, through that, keep things worse for longer for citizens -- at the Ingham County clownshow. In turn, they were outmaneuvered by brighter minds. Instead of the city getting outmaneuvered [[or being screwed, depending on how you look at it) for a change, it was the city that was able to outmaneuver the enemies to its rebirth.
By way of quick example, lets see who signed the petition: http://www.chicagotribune.com/news/c...56283.htmlpage
Kevyn Orr - We know he's good, we've all gone over his qualifications. See Stephen Henderson's article from the freep today. A true value add, here, already, because there's no way we've already incurred as much in fees for them to do their homework as it would have costed to defend all sorts of litigation in state court. The city comes out paying less here, in the big picture.
And on the JD side:
David Heiman - Past chair of the American College of Bankruptcy
Heather Lennox - Fellow of the American College of Bankruptcy
Bruce Bennett - Orange County's BK Counsel when they filed, and he was once named #2 lawyer/runner-up in America for National Lawyer of the Year by the National Law Journal
Add in the local counsel from Miller Canfield, and you have a veritable A-Team on Board for the city, for once. Meanwhile, a lot of the local creditors are still on the same "friends and family" plan that the city had been on for so long, and are getting schooled by the pros that specialize.
It's nice to feel that the city isn't just in good hands, but is in the best hands possible.
"That is not a sure thing. That's why it's called the full faith and credit of the city's implicit agreement to raise taxes. They've always assumed they could legally get theirs and nobody ever argued they couldn't - til Orr."
That's because state law gives bondholders the recourse of going to court and having a judge enforce the necessary tax levy to raise the funds to pay the debt. It's why debt obligations aren't bound by statutory limits on millages. It's why a bankruptcy judge will likely give a dim view to claims that the city can't pay when there's a legal mechanism to collect the payment. Orr can go into court and claim the sky is green and the sun is blue but it doesn't make it so. As to your earlier claim about GO bonds issued without voter approval, if they're not voter-approved, they're not "General Obligation" bonds, no matter what someone calls them.
As I've said before, Orr and Snyder are playing fast and loose with the facts trying to conflate various obligations owed by various city entities in a PR effort to sell the EFM and now bankruptcy. What we'll see over time is that those distinctions matter quite a lot and that those obligations will get very different treatment when they are addressed outside of the PR spin machine.
are we going to see the other shoe drop?
republican held state CoA and state Supreme Court rules in favor of the state and against the creditors?
dunno about federal courts.
+1.
EBW, I don't think you'll find much pushback from most rational minds on that point. It's a question around whether or not certain stakeholders view educated, accomplished professionals as a veritable threat to their personal well-being.
Often times, my dad reflects on his own pension losses due to the airline bankruptcies; the blame typically converges toward "those damn bean counters" that make economic decisions on the margin. I often have to bite my tongue; after all, many of my classmates from business school, with no desire to screw over my father nor any other pensioner, are those very "bean counters" that draw their ire.
Agreed. One of the most frustrating things here in SE Michigan is that a large segment of the population has an anti-educated bent, which probably is a relic of the days when you could expect to make it with a high school education or less. Lord knows how many times I've heard "college boy" or some variation of it used as an insult.
And to really drive home that point, I think people against the [[legal equivalent of) bean counters at Jones Day miss the value added in having such competent attorneys. Take, for example, the way the city filed the BK filing prior to the pensioners' hearing in state court.
On one hand, Jones Day has racked up about a $1.5 million in legal fees, per a recent freep article, a lot of which it used to prepare the filing and do a lot of the legwork that Stephen Henderson's article discussed.
On the other hand, by doing the city's homework by having that bankruptcy filing ready and being able to submit it on essentially no notice, the sophisticated attorneys of JD -- at a cost of "only" about $1.5 million so far -- have saved untold millions in legal fees on the state court level as everyone and their brother challenged the EM law, the right to file bankruptcy, and so on.
It's not easy to see that forest for the trees of "$1.5 million," though, if you're not in the business or accustomed to seeing fees like that.
Folks, this is only page one of a 500 page novel. This is going to take a long time with more twists and turns than even Chas Dickens could imagine. BTW - the pension funds are not broke. The major City of Detroit pension funds have billions in assets. The amount owed are overdue contributions. Let's wait and see how this all plays out.Quote:
It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair…
What comes to mind is an argument I was having a year ago about whether or not Detroiters really were aware of the dire financial situation. We both concluded that until "payless paydays", there might be some who never fully believe.
So for entertainment's sake, we tried to hypothesize about what would need to happen before "payless paydays"...and we concluded that -- it's impossible to get there, no matter how bad the financial situation is. You can always avoid payless paydays by continuing to reduce staffing and services, except now there's no one providing services.
Look...it takes an hour -- minimum -- for police to show up. It can take hours to get through City Hall to get a permit. Of course there are no payless paydays. There's just no services.
The legal process requiring taxation is one component of this argument. THe other is the economic reality on the ground. If you raise taxes in order to meet your legal obligations, you might end up collecting less taxes because people/businesses move out of the city.
I don't know where that "magic line" of maximal tax rates before people leave, but you can make an argument that we're already long past it, considering the departure of 300,000 residents in a decade.
Legal mechanism can only go so far. Economic realities have to kick in, too.
Crittendon lost any remaining credibility she had with me after stating that the fees we are paying to consultants is outrageous while the poorest among us are suffering. I don't want the poor to suffer either, and I might even be able to get on board with the idea that there are systemic injustices that need to be repaired in our economy and laws.
At the same time, remember that we are talking about $20BB in debt. Do you really think the people whom you owe $20 billion dollars to are going to cap their legal bills at $1 million? Of course not. We need the brightest and the best representing the interest of our residents [[note: residents...not employees...not retirees...not creditors), and so far, I think Orr and Co. have been the best representation the city has had in decades.
If the federal bankruptcy court really puts the screws to the pensioners, you can expect to see half the localities in the US lining up at the bankruptcy court. If the pensioners get off relatively lightly, this won't happen.
"What comes to mind is an argument I was having a year ago about whether or not Detroiters really were aware of the dire financial situation. We both concluded that until "payless paydays", there might be some who never fully believe."
Furlough days anyone? I'm pretty sure that all of the CoD employees are painfully aware of what they've had to give up already to say nothing of what they'll likely to lose going ahead.
That's not correct. Orr was not the first. The Jefferson County, Alabama case put every creditor on notice that Full Faith and Credit may not mean what they always assumed it meant. http://www.nytimes.com/2011/12/24/bu...anted=all&_r=0
Edit: The quote was taken from a quote contained in a post by Novine. In other words these are not Novine's words.
Ray, I would say that it all depends on how the bankruptcy court defines "accrued financial benefits."
In a corporate pension fund, the total dollars held by the fund are allocated to the present and future [[vested) pension recipients. An individual's allocation, however, likely does not actuarially equate to the actual benefit that recipient has been promised. Most pensions calculate pension amounts on other factors, such as age and years of service, not amounts allocated to them in a plan.
For example, if a corporation goes into bankruptcy or otherwise becomes unable to fund a pension plan, the Pension Benefit Guaranty Board [[PBGC) then takes over the plan. The first thing the PBGC does is to actuarially recalculate each person's pension. Most plans have built in early retirement and other incentives that are not calculated based solely on one's age. So, anyone who retired prior to how the plan defines full retirement age [[usually 65) will have their pension reduced to an actuarially calculated amount [[which could easily halve the pension). Also, future COLA will be eliminated and previously granted COLA removed.
So, if the court defines "accrued financial benefits" as an amount allocated to a recipient, or follows the PBGC process, I would expect the pension amount for most City retirees to be at risk for reduction.
Being that I'm trying to find refuge and have written Michigan off I no longer have a dog in the fight.
However I hope this leads to exposals. Snyder, Gary Brown, Orr, Bing, Andy Dillon, bring out ALL of their bullshit and backroom deals and gamesmanship and interviews with the answer.
If the city/state is going to look this foolish internationally then let's flush everything. Two elections in the next 16 months.
Votes matter.
Well, she issued the TRO because she believes bankruptcy WILL harm pensioners and it is a certainty it will happen...hence the injunction.as to your second point...agreed. the order is probably toothless theater.Quote:
Aquilina said the Michigan Constitution prohibits actions that will lessen the pension benefits of public employees, including those in the city of Detroit. Snyder and Orr violated the constitution by going ahead with the bankruptcy filing, because they know reductions in those benefits will result, Aquilina said.
“We can’t speculate what the bankruptcy court might order,” said assistant Attorney General Brian Devlin, representing the governor and other state defendants.
“It’s a certainty, sir,” Aquilina replied. “That’s why you filed for bankruptcy.”
But the mathematics are in place for a neat Constitutional Crisis...this is nearly the "perfect storm" combination that can un-do it all.
There has to be some check for fraudulent bankruptcy filing, to insure that it wasn't done to elude a lawsuit...certainly there is case law already done, just not at this level...with government using another level of government to protect itself from civilian creditors.
Geez, this has so many dimensions of approach...it could be an entire economic system crisis. The President is going to HAVE to bail out Detroit, with as cozy a terms as the bankers got.
Wasn't it deTocqueville who said Democracy would be destroyed when the populace figured it could vote themselves a comfortable living out of the public largesse? That was the final stage of four in the evolution, if I remember correctly.
This might be what happens just afterward...maybe amplified a bit by some generational corruption in the political machine.