Detroit Becomes Largest U.S. City To File For Chapter 9 Federal Bankruptcy Protection [Video]

 

Video After The Jump

 

Via USA Today

 

"The fiscal realities confronting Detroit have been ignored for too long. I'm making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future," said Michigan Gov. Rick Snyder. "This is a difficult step, but the only viable option to address a problem that has been six decades in the making."

 

Michigan Gov. Rick Snyder

 

Detroit Emergency Manager Kevyn Orr, who in June released a plan to restructure the city's debt and obligations that would leave many creditors with much less than they are owed, has warned consistently that if negotiations hit an impasse, he would move quickly to seek bankruptcy protection.

 

Snyder signed off on the filing in a letter attached to court documents filed Thursday in U.S. Bankruptcy Court in the Eastern District of Michigan. A spokeswoman for Snyder did not immediately return telephone calls Thursday.

 

"It is clear that the financial emergency in Detroit cannot be successfully addressed outside of such a filing, and it is the only reasonable alternative that is available," Snyder said in the letter granting his state-required approval. "In other words, the City's financial emergency cannot be satisfactorily rectified in a reasonable period of time absent this filing."

 

Snyder continued: "I have reached the conclusion that this step is necessary after a thorough review of all the available alternatives, and I authorize this necessary step as a last resort to return this great City to financial and civic health for its residents and taxpayers. This decision comes in the wake of 60 years of decline for the city, a period in which reality was often ignored."

 

Orr's spokesman Bill Nowling said, "Pension boards, insurers, it's clear that if you're suing us, your response is 'no.' We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents."

 

This week, the city's two pension funds (which have claims to $9.2 billion in unfunded pension and retiree health care liabilities) filed suit in state court to prevent Orr from slashing retiree benefits as part of a bankruptcy restructuring.

 

Ambac Assurance Guaranty, which insures some of the city's general obligation bonds, has also objected to Orr's plan to treat those bonds as "unsecured," meaning they're not tied directly to a revenue stream and would receive pennies on the dollar of their value. Ambac, and other creditors, have threatened to file suit.

 

Detroit Mayor Dave Bing announces that Detroit filed for bankruptcy protection Thursday, July 18, 2013, as part of Detroit Emergency Financial Manager Kevyn Orr's, plan to get the city back on track.(Photo: Romain Blanquart, Detroit Free Press)

 

A deal with creditors gives the city access to $11 million a month in casino tax revenues that Orr has said is key to maintaining city services while negotiations, in or out of bankruptcy court, take their course with other creditors and unions.

 

Plunkett Cooney bankruptcy lawyer Doug Bernstein, who is not involved in the bankruptcy and is not representing any parties related to it, said Thursday that the filing was critical for the city, given a growing number of legal challenges.

 

On Monday, an Ingham County Circuit Court judge was scheduled to hold a hearing on the city workers' and retirees' challenge to stop the city from filing for bankruptcy protection. The employee groups, and separately the city's two pension funds in another lawsuit, argue that the governor — who must and has authorized the bankruptcy filing — cannot do so if the filings include plans to reduce pension benefits, because the state's constitution explicitly protects public pensions. If the state has such plans, it wasn't immediately presented in the court filing.

 

"They're going after the little guy. They don't care about the well being of retirees, people who live on set pensions they're entitled to for the rest of their lives. What they're worried about is paying the big folks."— Ed McNeil, negotiator for the American Federation of State, County and Municipal Employees Council 25, the city's largest employee union.

 

Bernstein said preventing the court hearing Monday is probably a key part of the strategy behind a Chapter 9 petition by the city, because a ruling in favor of the employees could put a halt, at least temporarily, to any moves by Orr and Snyder to proceed with a bankruptcy petition. A bankruptcy filing immediately stays all such court proceedings.

 

"The stay kicks in as soon as the filing, whether it's Friday or Monday," Bernstein said before Thursday's filing. "The key is taking advantage of the automatic stay. Because of the lawsuit filed by the pension funds and the hearings coming up Monday, it became a factor, so to the extent that (Orr) wanted to continue negotiations with creditors, now the city is forced to" file a Chapter 9 petition.

 

The 30- to 90-day eligibility fight could be prolonged beyond that time frame if creditors mount a significant challenge to Detroit's eligibility for bankruptcy. In other communities that have filed for Chapter 9 protection, such fights have extended the process a year or more, including Jefferson County, Ala., and Stockton, Calif., two of the largest municipal bankruptcy filings so far in the United States.

 

Detroit's bankruptcy is by far the largest of its kind in U.S. history, in terms of the city's population of about 700,000 and the amount of its debts and liabilities, which Orr has said could be as high as $20 billion. Because of the stakes involved, and the impact on residents statewide, as well as 30,000 current and retired city workers and Detroit's ability to stay in business, the case could be precedent setting in the federal judiciary. It also could set an important trajectory for the way troubled cities nationwide settle their financial difficulties.

 

 

Bernstein noted that Orr has said repeatedly his office would "negotiate with creditors until and unless we find that the negotiations won't bear fruit, with the understanding that the city has a limited amount of time" for those talks.

 

City Council President Pro Tem Andre Spivey said he understood that negotiations Orr was having with creditors weren't as fruitful as he'd hoped they be, and that he hopes the bankruptcy process will be relatively quick. But he stressed to residents that they needn't worry about the impact of the filing immediately.

 

"City services we provide will not be shut down," Spivey said. "We'll still be providing services, but the challenge is where we're going to get to as we go through the bankruptcy process."

 

The city has lost more than half of its population over the last 60 years. In 1950, the city was the fifth-largest city in the country with a population of around 1.8 million. Today its population is estimated at just under 700,000.

 

READ BANKRUPTCY FILING HERE





 

 

Michigan Governor Rick Snyder Authorizes Detroit Bankruptcy Filing


 


Going for Broke: Detroit Files for Bankruptcy


 


Detroit Files The Largest-Ever Municipal Bankruptcy In U.S. History

 

 

Follow Me

Join Our Facebook Fan Page Check Us Out On MySpace Follow Us On Twitter Follow Me On Youtube Like MY Facebook Page Connect With Me On Linkedin

 

Views: 4911

Tags: 9, Bankruptcy, Becomes, Chapter, City, Detroit, Federal, File, For, Largest, More…Protection, To, U.S., [Video]

Comment

You need to be a member of ThisIs50.com to add comments!

Join ThisIs50.com

Comment by Blaze on July 20, 2013 at 7:44am
@TTS.. you know he is. If that sorry piece of s**t wasn't getting what he demanded he would have quit aong time ago and moved to another city where he could dry up all of its resources (steal until there's nothing left).
Comment by MACCN_RB on July 19, 2013 at 8:40pm

I never understood what state governments and the federal government does with all the taxes they collect? oh yeah... they finance a war that only a small amount of people benefit from... terrorists? lmao that's the funniest war ever declared... I didn't even know a nation can do that.. but when you the most powerful and corrupt country in the world, who the f*** is going to say something. IT'S NOT GOING TO BE WW3... its going to be the U.S vs the world........

Comment by D.Money on July 19, 2013 at 4:30pm
@uptownrider: what a dumb a** question!
Comment by F***THEWORLD on July 19, 2013 at 2:22pm
Obama worst President ever! And this ain't the first time Detroit was in a shithole. Last time it was when GM shut down, their ain't s*** over there. No jobs have been there since that. Whats Bankruptcy actually gonna do? Nothing
Comment by fan123 on July 19, 2013 at 1:59pm

WW3 coming soon, thanks Obama/Bush

Comment by SMP on July 19, 2013 at 10:29am

lol

Comment by Grandmaster Z on July 19, 2013 at 10:24am

It's beginning. This is the first of many to file for bankruptcy, smh

Comment by Bad Habits on July 19, 2013 at 10:23am
Ohhhh @TTS you know these crooks are still getting everything they were making. I swear this gov just keeps bailing out the wrong people
Comment by T.T.S. on July 19, 2013 at 9:41am

Rick Snyder: "It was a painful, difficult decision, but there were no other viable options" blablablabla It wouldn't surprise me if he was still getting his enormous salary, city/state funded car, phone, etc. plus bonuses. If the city is really broke, how come you're not? How come politicians/CEOs get to keep their money and everything AFTER "their" city/company goes broke? FOH

Comment by Tha Phantom TV on July 19, 2013 at 9:37am
how a city go bankrupt?



Upcoming Releases

Members

 


Example Searches:
music, girls, Bentley

© 2014   Created by 50 Cent.

Badges  |  Report an Issue  |  Privacy Policy  |  Terms of Service

© 2012   Created by 50 Cent.   Powered by .

Badges  |  Help  |  Terms of Service | Privacy Policy