City of Detroit Files for Bankruptcy Protection

[Wesley Mouch]

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.

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.

[night-timer]

Attachment 20871 Speramus Meliora; Resurget Cineribus

Latin is not my strong point. What does the "Speramus..." motto mean? Can anyone provide a translation?

[corktownyuppie]

Latin is not my strong point. What does the "Speramus..." motto mean? Can anyone provide a translation?

My latin's bad too. But I think it's something like "We hope for the better; it rises from the cinder [[ashes)"

[Zacha341]

^^^^ 'Speramus Meliora; Resurget Cineribus [[Latin: We Hope For Better Things; It Shall Rise From the Ashes).

http://en.wikipedia.org/wiki/Detroit

[Novine]

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.

[Novine]

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.

[Cincinnati_Kid]

^^ I don't think it really matters. Besides, Detroit's debt is eons the size of Stockton.

[compn]

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

hahahahaha

[night-timer]

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?

[mwilbert]

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.

That may well be correct, but to the extent it is true, it would mean lower taxes on Detroit property, which would have benefits of its own.

[EastsideAl]

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

Do these assholes have to do EVERYTHING by the most sneaky, underhanded, and cynical method possible?

[Wesley Mouch]

Do these assholes have to do EVERYTHING by the most sneaky, underhanded, and cynical method possible?

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.

[DJ Tom T]

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

[EastsideAl]

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.

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.

[sumas]

Asshole doesn't seem obscene. Bur then of course, I live in the city, so I guess it makes me "street".

[313WX]

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.

+1 for this post EastsideAl. This is exactly why I have practically given up on Detroit and Michigan. The culture/mindset you just described needs to change, but I don't see that happening.

[Papasito]

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:

DUBAI:

WHY? Because we let it happen.

[TexasT]

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.

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.

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.

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."

[mwilbert]

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.

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.

What she said.

[compn]

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.

[Novine]

"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.

[TexasT]

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.

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.

[Novine]

"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.

[TexasT]

"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.

[Wesley Mouch]

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."

Seems like a lot of us claim 'backhanded crap' -- but only to those who don't think like us.