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Per the live tweets in the Freep and News. He has approved borrowing $120MM for quality of life improvements but denied the $165MM settlement borrowing.
Sounds like he wants the city to sue the banks. I'm more and more impressed with the BK judge in every ruling and am getting more concerned about Orr. He initially planned to settle for 230MM.
Orr is a banking shill. That is why the nerd won't release transcripts or tapes of their conversations pre-EMF appointment
I was really hoping that wasn't the case but [[and I am no shill for the retirees/pensions) he is willing to throw a lot of money to the banks while only cutting services that are to employees or retirees.
I'll wait to see how it shakes out but I am losing faith in Orr. The city would be out an extra $65MM+ had Rhodes not called his deals out
I have to say, I did not see that coming. The debtor, creditor and mediator were all on board.
I fear that the counterparties will attempt to trap the cash, and the city will be worse off.
But it goes to show that bankruptcy is not a system to get "banks" paid. It's not [[generally) pro-creditor.
The swap counterparties are now looking at the same recovery as the other unsecureds: 10% or so.
That's more money in the pot for the other creditors. It may go to city services, but I don't think the city undertakes the Barclays loan. Who knows now.
Glad to see that some responsible person is standing against allowing the banks to wholly escape from the consequences of their manipulated fraudulent transactions. It sure as hell wouldn't be our bankers-best-friend exalted glorious ruler Orr.
What about those exemptions that have been embedded in the bankruptcy codes that provide a “safe haven” for the banks and ensure payment of their swap deals?Quote:
Originally Posted by BankruptcyGuy
Leaving aside any minuscule knowledge of municipal bankruptcy laws -- which mostly come from Bankruptcy Guy -- thanks -- and leaving aside any preconceived notions about the rules...Quote:
Originally Posted by BankruptcyGuy
It seems reasonable to me that the banks/swaps be treated the same as everyone else. These banks knew what they were doing. And they knew, or should have known, what the city was doing. The city was sliding a noose around its neck seeking credit that any reasonable person would have seen as extremely risk and very likely to fail. It also had to be apparent that the likely cost was going to fall to the citizens/taxpayers -- and not to the public officials who were agreeing to the deal. They would be long gone.
Everyone knew this. Of this there was no doubt.
Thus, I have no sympathy for the banks here. Let them share in the pain, in proportion to their share of the 'crime'.
Leaving law aside, this would seem quite just.
P.S. Lest anyone think I'm going soft -- this is the same logic as I apply to the pensioners. They deserve a hit -- because they knew or reasonably should have known that that they were taking good money from a defenseless city that was heading to bankruptcy. Sure, they had a contract. So did the banks. [[Logic applies less to the 15k pensioner, and more to the 100k who has another job doing contract work for the city too.
We are in uncharted waters with the Detroit bankruptcy case, but both the spirit and the letter of Chapter 9 bankruptcy laws are pretty clear.Quote:
Originally Posted by BankruptcyGuy
The court and the creditors can not force municipal asset sales. The only authority that the bankruptcy court has is to disallow settlements and agreements that are negotiated in bad faith, or situations where the debtor municipality refuses to accept realistic reorganization solutions, or situations where the municipal debtor is hiding or shielding assets and/or revenue streams which the liquidation of would not impair the ability of said municipality to continue as a going concern.
When people hear the word "bankruptcy", they think of a Chapter 7 liquidation. However, Chapter 9 is nothing like Chapter 7. You can't just liquidate a municipality, and Chapter 9 is specifically designed to prevent that scenario.
Of course, the bankruptcy court will hear none of the moronic Brenda Jones type arguments that the city should just be able to go on with business as usual, but the bankruptcy court is also charged with the responsibility to protect the ability of the debtor municipality to continue normal functions.
As the city of Detroit has slid into bankruptcy, there have been a number of cuts and concessions that the city has made in order to slow the bleeding. The regionalization of Cobo Hall, the regionalization of DIA funding, and the lease of Belle Isle to the state DNR are all examples of prudent cost cutting measures which have resulted in the city saving tens of millions every year, while maintaining, and even improving, the return and service delivery of these municipal assets.
The whole point of a Chapter 9 bankruptcy is not to oversee the liquidation of municipal assets for the purpose of creditor renumeration. Chapter 9 is a restructuring process designed to restructure, and also reduce, the debts and liabilities of a municipality so that it can continue as a going concern and continue to provide a reasonable standard of service delivery to the citizens and taxpayers.
The debtor municipality is not required to liquidate all assets in order to make the creditors whole. The municipality is only required to act in "good faith", and make reasonable cuts and compromises to satisfy the requirements of a Chapter 9 bankruptcy.
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Leasing Belle Isle to the state DNR is a reasonable, prudent cost-cutting measure that helps the city to retain and attract a residential, tourism, and business tax base.
Creating a regional authority to operate and fund Cobo Hall is a reasonable, prudent cost-cutting measure that helps the city to retain and attract a residential, tourism, and business tax base.
Passing a regional DIA funding tax is a reasonable, prudent cost-cutting measure that helps the city to retain and attract a residential, tourism, and business tax base.
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Selling off city assets to slightly reduce creditor losses would be devastating for most of the parties involved, especially for the citizens, businesses, and other taxpayers.
Even if the fire sale of DIA art made a billion dollars, it still wouldn't cover more than a small fraction of the city's debt, and the actual cost would be immeasurable.
Liquidating any part of the DIA would result in an immediate repeal of the regional DIA tax, which would kill the DIA.
The sale of DIA assets would not only kill the regional art tax and the DIA itself, it would kill any hope of funding our new regional transportation authority, and it would most likely kill the hope of a regional water and sewerage authority.
Metropolitan Detroit has the worst city/suburb divide in the country, and probably the entire world. This lack of regional cooperation and trust has held our city and region back for over 40 years.
After decades of failed attempts at regional cooperation, we have finally started to see some hope and progress. The creation of a regional transportation authority, after twenty-some failed attempts over the last 40 years, and the passage of regional arts funding, after decades of resistance, shows that metro Detroiters are finally open to regional cooperation.
If any part of the DIA is sold off to pay city debts, it will just prove the long-standing assertion that Detroit is just mooching off the suburban taxpayers, and that any partnership or investment in the city is just throwing good money after bad.
If there is any liquidation of DIA assets, not only can we kiss the DIA goodbye, we can forget about having a regional transit system for AT LEAST another generation.
We are now just coming to a point where where we can start talking about dealing with the bitterness and resentment that manifested itself in 1967. We have lost two generations of metro Detroiters to the hate and distrust that came to a head that summer. We are now into two generations of metro Detroiters who didn't have to live through those tumultuous years, but our lives and communities have been shaped by them.
It is no coincidence that voter support for regional arts and transit has recently shifted from no to yes. We are 47 years past the riots, and there are now two generations of voters who don't have those personal scars and don't want to continue on the same shitty path that our forefathers walked.
The liquidation of DIA assets would result in immeasurable losses and damages, of which the destruction of the DIA itself would likely not even be the biggest loss.
Destroying our tenuous foray into regionalism in its nascent stage would be a devastating blow which would likely set back regional progress for decades.
This case is so much more than a settlement between debtors and creditors. I am cautiously optimistic that the judge see it that way as well.
It goes back further than 1967. In the years when whites ran Detroit and blacks were a minority in the city, Detroit had all the factories and all the money. Detroit had a superior, world class school system. The rural counties [[and Oakland and Macomb were rural) lived with dirt and gravel roads, underfunded country schools, and slim budgets. Detroit didn't share then.
When Detroit became impoverished and the suburbs boomed, all of a sudden Detroit wanted to "share".
That's nice revisionist history but it's not backed up by the facts. It's only recently that schools received significant funding from the state. Prior to Proposal A, almost all school funding was local. There was no vehicle to share tax dollars. Same with roads. It was either gas tax money or local property taxes, which is still the case. Also, there were very few people living in most areas of the tri-county region. It was mostly agricultural areas with farmers who had no need for big, flashy government or the services that came with it. There was little sharing because neither side had an interest or particular need to share.
After the 1920s, Detroit did extend water and sewer services into the suburbs without requiring annexation. That fueled the explosion of suburban sprawl at Detroit's expense with little benefit back to the city. If Detroit had been like many large cities and tied water and sewer service to annexation, we wouldn't even be having this conversation because Detroit would be like Columbus or Phoenix or Houston, having captured most of the region's suburban growth.
I was looking to make a comment along these lines but Hermod said it better, "When Detroit became impoverished and the suburbs boomed, all of a sudden Detroit wanted to "share".Quote:
Originally Posted by Hermod
The folks in outstate Michigan are really getting to feel like the red headed step child with all this talk of sending money and diversion of resources to help regain the old glory of Detroit.
The Glory days are over. Instead of Rebuilding or Regaining what once was, why not Adapt to Current Conditions. Use this opportunity to get lean and mean.
If you go to the U.P. it won't take you long to figure out why they want to leave Michigan and hook up with Wisconsin.
No... they just want to be an independent state. Any idea of hooking up with Wisconsin just gets them back to the same situation that they had with Michigan... their destiny is controlled from points south.... :[[Quote:
Originally Posted by Dan Wesson
Why doesn't Kevin Orr and the bankrutpcy court open a public bank for the city of Detroit, they would have 10X the amount of money to lend out. They would also save on their debt service line, Kevin Orr and the bankruptcy court could set it up with the emergency managers authority.
If the Governor took the 976 million in surplus and were to open a public state bank, the state would be able to loan out 10x that much, the ratio of loans to deposits is 10:1, therefore the state would immediately have 9.76 billion to loan out to local governments for infrastructure inprovements, then all the interest paid pack for the loans would go back to the state bank and then could be loaned back out at 10x the amount- this is fractional reserve banking. Also I believe the state has a debt service line with regular banks to handle all the states financial transactions, if the debt service line was 2 billion, the state would immediately save 2 billion just for setting up the public bank, twice the current surplus.
I believe the same could be said for the city of Detroit, if the city could put its tax receipts in a public city bank of Detroit, they would have 10x the amount deposited to pay for infrastructure or pensions, I believe this could cover any current shortfall and they wouldn't need to get a loan from other banks, I believe they would also save costs on their debt service line as well.
This is what the State of North Dakota does and Germany.
This has worked well for North Dakota as the only state owned public bankhttp://www.motherjones.com/mojo/2009...vy-wall-street
See the new book about the public banking solutionhttp://www.publicbanksolution.com/
It would probably be easier for the city to setup a public bank because all the finances are controlled by the emergency manager and the bankruptcy court.
Erik -- nice to read a rational summary of what we're going through. I pretty much agree with everything.Quote:
Originally Posted by erikd
Only thing I'd take issue with is your belief that our city/suburb divide is the worst. Certainly it is bad. But I think most city/suburb divides are bad. In our case, the divide is mostly a mistrust of the city, based on the city's behavior. I am quite encouraged by the degree of support for the city from most people in the region. What they have not yet accepted is that the city is behaving well. Mr. Cushingberry is thus the most dangerous actor in our drama. He is a living reminder that some things about the city have not changed -- and that some in the city look to a return to 'business as usual'.
"If you go to the U.P. it won't take you long to figure out why they want to leave Michigan and hook up with Wisconsin."
Wisconsin offers better welfare? The UP is subsidized by downstate dollars, not the other way around.
Yes, Wisconsin does have better welfare bennies I hear and a new influx from nearby states due to that. Except you best take you mittens, hat and ugg boots with you!
I very much appreciate the thoughtful and informative comments of Erickd about bankruptcy. Most of us think of a municipal bankruptcy as similar to a firm going bankrupt. As Erickd notes, it is very different. It is similar, in some ways, to the bankruptcy proceedings involving a railroad. Given the importance of railroads to commerce, bankruptcy courts will typically sell a railroad, not necessarily to the highest bidder, but rather to a bidder who gives evidence of continuing rail service. Going back to the 1970s, the city-suburban split in metro Detroit was also a black-white divide. That is much less the situation today since about one-third of the area’s African Americans live in the suburbs. And they are widely dispersed across the suburban ring. Also, the racial attitudes of whites have greatly changed in the last two generations. To be sure there are important racial and city-suburban disparities but the situation has changed in recent decades. There quite a few examples of the city of Detroit gradually transferring its responsibilities for its assets to non-profits with considerable success. Eastern Market is one example and Clark Park another. There are attempts to involve private non-profits in the administration of Chandler Park, Palmer Park and River Rouge Park but they have been only moderately successful. WSU plays a considerable role in policing Midtown. And the Detroit public school system has been downsized because of the charter school movement and Governor Snyder’s new EAA. In the 1920s or 1930s, the city would have built M-1 light rail. That’s not the case today. There are some hopeful signs in Detroit. Downsizing the city’s financial responsibilities does not always mean closing neighborhoods, police stations and fire houses.
Funny that the idea of welfare comes first to your thinking.Quote:
Originally Posted by Novine
It must be outside of your world view but Agriculture, Dairy and Mining is also a Big Business up state Wisconsin. Even most all the TV signals for the western UP originate there. Check out the auto license plates on the roads and shopping parking lots if you travel this way.
You said: The UP is subsidized by downstate dollars, not the other way around.
That point I will concede.
Can you deny that that northward flow of monies is on the decline and a giant black hole has developed in southeast Michigan.
No, but logistics and demographics do.Quote:
Originally Posted by renf
Funny, just read a NYTimes article about how Wisconsin residents [[of Superior) are envious of Minnesota [[Duluth) resident benefits. Article hinted that Wisconsin had tightened up, courtesy of Walker.Quote:
Originally Posted by Zacha341
Certainly the UP is still highly dependent upon subsidies from the rest of the state [[and nation), and southeast Michigan is still the economic engine of the state. So I guess I would deny it.Quote:
Originally Posted by Dan Wesson