Judge clears Detroit for bankruptcy protection

posted at 1:21 pm on December 3, 2013 by Erika Johnsen

It took about five months of political, legal, and financial finagling, but a bankruptcy judge has ruled that Detroit is now finally, officially eligible for bankruptcy protection in what is now the largest municipal bankruptcy in U.S. history after the decades on decades of profligate and purely progressive leadership steadily ground Detroit down from its postwar status as America’s fourth-largest city. Via NBC:

“The city no longer has the resources to provide its citizens with basic police, fire and emergency services,” Judge Rhodes said, ruling that Detroit, once the nation’s fourth-largest city, “was and is insolvent.”

The long-awaited decision sets up a bitter battle between the city’s finance officials and its unions, creditors and retirees, who expect deep cuts in pensions and sales of treasured city assets, such as its art collection, as part of the Chapter 9 process. …

In the meantime, Detroit’s emergency financial manager, Kevyn Orr, is expected to proceed towards the city’s next major step: submitting a plan to adjust Detroit’s approximately $18 billion in debt. Judge Rhodes said he will not stay the bankruptcy proceedings in the wake of any possible appeals.

From the beginning, the overwhelming sticking point of the bankruptcy filing was whether or not the city’s managers negotiated “in good faith” with the relevant unions and pensioners, usually a prerequisite for bankruptcy eligibility and one which the unions vehemently argued that the city categorically did not meet. The judge ruled that the city may have left something to be desired on that front, but that it’s also kind of impossible to negotiate with a “stone wall” and that the city’s extremely dire financial woes were the trump card here.

The legal battle certainly isn’t over, however; no doubt the unions will continue to appeal the ruling as many times as they possibly can, and the judge did iterate that he would be keeping a watchful eye over the proceedings, but the good news is that municipal managers can at last get to work on submitting a plan to pay off part of Detroit’s more than $18 billion in debts and to start reinvesting in the severely lacking essential services. As the judge noted in his ruling:

“We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”


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Poor Detroit. If the Republicans hadn’t been pouring sand in the gears there for 50 years, things would be just great.

oldroy on December 3, 2013 at 1:25 PM

The key part of the ruling:

Rhodes’ decision is a critical milestone. He said pensions, like any contract, can be cut, adding that a provision in the Michigan Constitution protecting public pensions isn’t a bulletproof shield in a bankruptcy.

Mr. Bingley on December 3, 2013 at 1:26 PM

This is not a surprise. I’ve heard good things about this particular judge, and had some confidence in him to correctly apply the law in a fair and impartial way. If the case goes into other courts I can’t say what will happen but I think the bankruptcy will proceed apace and be handled in a fair way as long as the ball is in his court.

Doomberg on December 3, 2013 at 1:26 PM

Detroit…a Democrat paradise…

PatriotRider on December 3, 2013 at 1:29 PM

I want to know how anyone thinks the citizens of a city are liable for the pension debts of the city? In Houston our public employee pensions are negotiated by the mayor and the union boards.

1) The mayor wants the unions to vote lock step for democrats and promises them lavish pensions for those votes. That has been accomplished since its inception 12 years ago.

2) The mayor and unions have agreed to deferred compensations since the second year of the initial contracts. The citizens have no say whatsoever unless they happen to be on the union board.

The people entirely responsible for the inception and implementation of the fiscal viability of the pensions have been in control the whole time. If they are underfunded that is their fault. I like this ruling.

DanMan on December 3, 2013 at 1:30 PM

Detroit financial crisis
8m
====

The American Federation of State, County and Municipal Employees files notice of appeal in Detroit bankruptcy case – @ScottCohnCNBC
end of bulletin

http://www.breakingnews.com/topic/detroit-financial-crisis/
===========================================================

AFSCME Union

http://www.afscme.org/

canopfor on December 3, 2013 at 1:31 PM

Typical end result of years of progressive politics.

Newark, Phili, Chicago next….

Then the states/territories turn, but Puerto Rico will start with Mexifornia and Illinois soon to follow

txdoc on December 3, 2013 at 1:32 PM

This is not a surprise. I’ve heard good things about this particular judge, and had some confidence in him to correctly apply the law in a fair and impartial way. If the case goes into other courts I can’t say what will happen but I think the bankruptcy will proceed apace and be handled in a fair way as long as the ball is in his court.

Doomberg on December 3, 2013 at 1:26 PM

It’s really not that difficult of a decision:

Bankruptcy Clause + Supremacy Clause > State Constitution

blammm on December 3, 2013 at 1:32 PM

Crack is the #1 money maker in Detroit if you can get past the gunfire.

docflash on December 3, 2013 at 1:36 PM

Mr. Bingley on December 3, 2013 at 1:26 PM

You are quite right, that is the key part of the ruling.

I hope this precedent has public sector unions around the country very concerned. They helped create this bankruptcy, and others, while also creating significant financial crisis with their greed, corruption, and malfeasance.

canopfor on December 3, 2013 at 1:31 PM

Yeah, that’s not unexpected. They want their cake and they don’t want to have to pay for the ramifications of their greed and malfeasance. I hope the appeal will be shot down, but you can bet they are judge shopping it…

Athos on December 3, 2013 at 1:39 PM

I had an exchange with a very liberal guy who flat out told me that Detroit was actually a very conservative city and that’s why it’s in such trouble. He tried to explain that a failure to plan long term for environmental concerns is why the auto industry failed and population steadily decreased, etc. I have to admit there was not much I could say. It is pointless to engage with devotees like that. Amazing.

Borgcube on December 3, 2013 at 1:40 PM

Where is Detroit?

Wade on December 3, 2013 at 1:43 PM

Detroit eligible for bankruptcy protection: U.S. judge

By Joseph Lichterman and Bernie Woodall
DETROIT Tue Dec 3, 2013 1:14pm EST
**********************************

Detroit’s labor unions, retirees and pension funds, all of which likely will bear the brunt of austerity measures Orr plans to impose, had argued against the city’s bankruptcy in a nine-day eligibility trial. Orr has said he plans to impose a restructuring plan by the end of the year.

Rhodes also said that the city could cut pensions as part of the restructuring, despite the argument that Michigan’s constitution protects them from being slashed. However, Rhodes warned he will not rubber-stamp any pension cuts.

“Nobody should interpret this holding, that pension rights are contract rights, to mean that this court will necessarily confirm any plan of adjustment to impair pensions. It will not casually or lightly exercise the power under federal bankruptcy law to impair pensions,” Rhodes said.
(More…)
=========

http://www.reuters.com/article/2013/12/03/us-usa-detroit-bankruptcy-judge-idUSBRE9B20PZ20131203

canopfor on December 3, 2013 at 1:44 PM

Its all the GOP fault… even though they weren’t in charge

cmsinaz on December 3, 2013 at 1:44 PM

I have to admit there was not much I could say. It is pointless to engage with devotees like that. Amazing.

Borgcube on December 3, 2013 at 1:40 PM

Resistance was futile?

oldroy on December 3, 2013 at 1:45 PM

Okay…..when does OCP show up?

BobMbx on December 3, 2013 at 1:45 PM

canopfor on December 3, 2013 at 1:31 PM

Yeah, that’s not unexpected. They want their cake and they don’t want to have to pay for the ramifications of their greed and malfeasance. I hope the appeal will be shot down, but you can bet they are judge shopping it…

Athos on December 3, 2013 at 1:39 PM

Athos:Judge shopping,..no doubt:0

canopfor on December 3, 2013 at 1:47 PM

DERPtroit.

Progressive Shinola piled high in the Motor City. Coming to a country near you.

PappyD61 on December 3, 2013 at 1:48 PM

Its all the GOP fault… even though they weren’t in charge

cmsinaz on December 3, 2013 at 1:44 PM

cmsinaz: I gots a cool twitter for ya,..cheers:)
================================================

History In Pictures
History In Pictures
@HistoryInPics

Historical moments, in pictures.

https://twitter.com/HistoryInPics

canopfor on December 3, 2013 at 1:49 PM

Ahem … cough, cough … ahem …

BWWAAAAAAAAAAAAAAAAAHAAAAAAAAAAAAAAAHAAAAAAAAAAAAAHAAHAAAAAAAAAAAHAAAAAAAAHAAAAAAHAAAAAAHAAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA …

and teehee, too.

M240H on December 3, 2013 at 1:49 PM

Okay…..when does OCP show up?

BobMbx on December 3, 2013 at 1:45 PM

BobMbx: You Rang:0
===================

HistoryInPics History In Pictures 1h
Richard Nixon and Robocop pic.twitter.com/gTc4tRPJSp

https://twitter.com/HistoryInPics/status/407928231900512256/photo/1/large

canopfor on December 3, 2013 at 1:51 PM

Union power!

VibrioCocci on December 3, 2013 at 1:52 PM

Poor Detroit. If the Republicans hadn’t been pouring sand in the gears there for 50 years, things would be just great.

oldroy on December 3, 2013 at 1:25 PM

Heh!

I’m surprised Detroit hung on as long as it did. There were/are something like 80 different public sector union bargaining units. How the hell do you not ulitmately bleed the city dry, especially in a state where there is no difference between organized labor and the MI Democrat party?

Happy Nomad on December 3, 2013 at 1:54 PM

President Obama will issue a blatantly unconstitutional Executive Order that bails out Detroit. Just wait.

Mike Honcho on December 3, 2013 at 1:55 PM

“The city no longer has the resources to provide its citizens with basic police, fire and emergency services.

treasured city assets, such as its art collection…”

Hmmm. Anyone see what may have been the problem here?

Tsar of Earth on December 3, 2013 at 1:57 PM

The Associated Press ‏@AP 1h

A look at the next possible steps in Detroit’s unprecedented bankruptcy decision: http://apne.ws/IJTRUH -MM
=====================================

http://bigstory.ap.org/article/look-next-steps-detroits-bankruptcy

canopfor on December 3, 2013 at 2:00 PM

How many states, counties and cities have been ruined by promises made that cannot be kept? The Dems have destroyed so much of what was good in our nation.

My hope is (and I still have hope) that enough people will awaken, enough will turn back to faith (yes, faith), enough will volunteer to work on elections (b/c the Dems are WAY ahead of knowing this system than we are) and that the conservative elements will stop looking for 100% agreement, get more Rs than Ds everywhere and then bug them! It can be done – the Dems have gone too far left to return to much of anything sane. It’s up to the rest of us. And reminding our legislators of this is key.

Ultimate problem w/ socialist/leftist/Dems – they run out of OPM. Thank you, Margaret Thatcher.

MN J on December 3, 2013 at 2:00 PM

Where is Detroit?

Wade on December 3, 2013 at 1:43 PM

Okay, hold up your map of MI (aka your left hand). Detroit is about at the base of the outside of your thumb. ;0

Seriously, I know you were joking but when I lived in MI I was surprised at the number of people who would use this aid to describe where stuff was. MI, BTW, is also a great-shaped state if you want to make oven mitts for tourist gift shops.

Happy Nomad on December 3, 2013 at 2:01 PM

Where is Detroit?

Wade on December 3, 2013 at 1:43 PM

It’s where the Japanese don’t make cars in the US.

Tsar of Earth on December 3, 2013 at 2:02 PM

I had an exchange with a very liberal guy who flat out told me that Detroit was actually a very conservative city and that’s why it’s in such trouble. He tried to explain that a failure to plan long term for environmental concerns is why the auto industry failed and population steadily decreased, etc. I have to admit there was not much I could say. It is pointless to engage with devotees like that. Amazing.

Borgcube on December 3, 2013 at 1:40 PM

you find much good stuff like that the http://www.dailykos.fantasy website.

My favorite recent interaction with a leftist was I was informed that the way to make the ultra-rich work harder is to increase the marginal tax on incomes above $2,000,000. The leftard was a MD/PHD. I wondered if his income was above $1,000,000 is why he picked $2,000,000?

thuja on December 3, 2013 at 2:03 PM

President Obama will issue a blatantly unconstitutional Executive Order that bails out Detroit. Just wait.

Mike Honcho on December 3, 2013 at 1:55 PM

No he won’t for two reasons.

First, he doesn’t care about MI voters anymore. Secondly, if he did that then there would be a long line of cities (almost all of them ruined by Dems) waiting in line behind Detroit.

Happy Nomad on December 3, 2013 at 2:03 PM

Happy Nomad on December 3, 2013 at 2:01 PM

I used to live in Birmingham, Pontiac and nearby Toledo, Ohio. That seems like a lifetime ago when Detroit was the economic driver of the economy. Now after years of the democratic party with their payola from the unions have ruined a once proud city and area. It will once again be first, but first of the domino effect.

Wade on December 3, 2013 at 2:10 PM

He tried to explain that a failure to plan long term for environmental concerns is why the auto industry failed and population steadily decreased, etc. I have to admit there was not much I could say. It is pointless to engage with devotees like that. Amazing.

Borgcube on December 3, 2013 at 1:40 PM

Detroit failed because the auto industry wasn’t green enough? Huh? The population of Detroit steadily decreased because anybody that could fled to the suburbs!

What Detroit really needs to do is reduce the size of the “city” so that some people find themselves outside Detroit city services. Wayne County may not like it but tough. If Memphis can shut down its schools and force all their problems on Shelby County, why can’t Wayne County absorb a bunch of Detroiters?

Happy Nomad on December 3, 2013 at 2:12 PM

I used to live in Birmingham, Pontiac and nearby Toledo, Ohio. That seems like a lifetime ago when Detroit was the economic driver of the economy. Now after years of the democratic party with their payola from the unions have ruined a once proud city and area. It will once again be first, but first of the domino effect.

Wade on December 3, 2013 at 2:10 PM

I lived on the other side of the state. I can’t say this will improve things for them. For years now, the problems of Detroit and Flint were “solved” by the state using West Michigan as an ATM. Critical road improvements that would develop W. MI as the auto industry and other manufacturing disappeared were ignored. Just so long as E. Michigan and I-94 were taken care of.

Happy Nomad on December 3, 2013 at 2:16 PM

I met a traveller from an antique land
Who said: Two vast and trunkless legs of stone
Stand in the desert. Near them, on the sand,
Half sunk, a shattered visage lies, whose frown,
And wrinkled lip, and sneer of cold command,
Tell that its sculptor well those passions read
Which yet survive, stamped on these lifeless things,
The hand that mocked them and the heart that fed:
And on the pedestal these words appear:
“My name is Ozymandias, king of kings:
Look on my works, ye Mighty, and despair!”
Nothing beside remains. Round the decay
Of that colossal wreck, boundless and bare
The lone and level sands stretch far away.


Wait. Are you telling me there’s a statue of “THE WON” just outside of Detroit?

M240H on December 3, 2013 at 2:16 PM

The legal battle certainly isn’t over, however; no doubt the unions will continue to appeal the ruling as many times as they possibly can

Hey unions, you broke it, you bought it.

Happy Nomad on December 3, 2013 at 2:24 PM

Good. The public employees unions want it both ways. They want to be able to drive a city into bankruptcy AND keep their full pensions. Not this time.

WannabeAnglican on December 3, 2013 at 2:26 PM

I lived on the other side of the state. I can’t say this will improve things for them. For years now, the problems of Detroit and Flint were “solved” by the state using West Michigan as an ATM. Critical road improvements that would develop W. MI as the auto industry and other manufacturing disappeared were ignored. Just so long as E. Michigan and I-94 were taken care of.

Happy Nomad on December 3, 2013 at 2:16 PM

Born and lived in Kalamazoo until 7 yrs. old before moving to Birmingham. All my relatives from Kalamazoo and Battle Creek have long passed and I am pleased they are not here to see what disgrace the politicians and unions have brought to Michigan. But the Ohio State and Michigan game on Saturday was great.

Wade on December 3, 2013 at 2:30 PM

I’m sure Obama will do something about this as soon as he hears this news.

slickwillie2001 on December 3, 2013 at 2:31 PM

The leaders of CalPers/CalStrs and all public-employee unions in CA are trembling in their boots over what this could do to them in the BK’s ongoing in Stockton, San Bernardino, and soon to a city near you.

Like MI, CA’s public pension systems were thought to be inviolable.
The question is: Do you want a little off the sides, or should we just lop off your head?

Another Drew on December 3, 2013 at 2:31 PM

“We have here a judicial finding that this once-proud city cannot pay its debts. At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”

Bwwwwwahahahahahahahahahahahahahahahaha Cry Weep.

Sacramento on December 3, 2013 at 2:34 PM

Good. The public employees unions want it both ways. They want to be able to drive a city into bankruptcy AND keep their full pensions. Not this time.

WannabeAnglican on December 3, 2013 at 2:26 PM

So Cloward-Piven at the city level doesn’t work; good to know.

slickwillie2001 on December 3, 2013 at 2:38 PM

At the same time, it has an opportunity for a fresh start. I hope that everybody associated with the city will recognize that opportunity.”

Not the union thugs, they’re just too stupid.

GarandFan on December 3, 2013 at 2:42 PM

If Obama had a city it would look like Detroit.

jrfromdallas on December 3, 2013 at 2:51 PM

Gosh, hasn’t the Whitehouse purchased this icon of liberalism and socialism yet as evidence of Bush’s failures.

The last good thing to come out of Detroit was Motown.

Don L on December 3, 2013 at 2:59 PM

I’m trying to remember what a certain presidential candidate said about Detroit in 2008. right on the tip of my tongue…

WitchDoctor on December 3, 2013 at 3:34 PM

After the bailout screwed the bond holders in favor of the unions, I hope the unions get clobbered. It will set a precedent for other cities to follow.Karma can be very difficult.

scboy on December 3, 2013 at 3:43 PM

The last good thing to come out of Detroit was Motown.

indeed! I caught Rare Earth in a reunion show in Houston and while they looked like a bunch of Joe 6-packs they could still bring it. And after the set the entire band was walking the concourse and heartfelt thanking everybody for coming. Hardest working guys in rock and roll I tells ya.

We also like Sweaty Ted Nugent down here.

DanMan on December 3, 2013 at 3:45 PM

WitchDoctor on December 3, 2013 at 3:34 PM

wasn’t that a pillar of the 2012 campaign theme?

DanMan on December 3, 2013 at 3:47 PM

Always tickles me when a judge rules against union thugs. Funny, funny, funny. Wonder what the thug in chief says about this? Will be fun to listen to his comments.

tmgrant on December 3, 2013 at 4:05 PM

Actually…this is the way out for all Blue cities:
(1) Promise the moon to public employee union workers
(2) No money to pay for promises
(3) Bankruptcy reset
Result:
(a) former public employees get no pension, so go on medicare and work as Walmart greeters
(b) City returns to step 1 above.

SunSword on December 3, 2013 at 4:15 PM

Being one of few conservatives living in my area, I certainly understand those few living in Detroit. Good luck and may your situation improve.

DDay on December 3, 2013 at 4:45 PM

WitchDoctor on December 3, 2013 at 3:34 PM

wasn’t that a pillar of the 2012 campaign theme?

DanMan on December 3, 2013 at 3:47 PM

Yep, so now that they’re both dead, now what?

DDay on December 3, 2013 at 4:59 PM

Federal Appeals Courts have a rather subtle way of dealing with these things. First off, understand that NO upper level courts want to get involved in anything of this size, since it is so unbelievably messy and is generally seen as a no-win situation for the court. (Except for the Bankruptcy Judges, who do this exclusively.)

So, the path of Least Resistance for any Appeals Court is to accept the appeal, but refuse to issue any stays on the lower court, allowing the bankruptcy to proceed. Then they set arguments to be heard about a year from now, then they entertain motions for this that and the other for another 6 months, then they go on vacation, then they hear the arguments, then they take another vacation,and then they get around to thinking about issuing a decision about another year or so after that. The whole game is about killing enough time until they can say “Whoa! Look at that! Bankruptcy’s already been settled, case is moot.”

Watch for it, and in big cases you’ll see Courts pull that dodge all across the country.

Tom Servo on December 3, 2013 at 5:04 PM

I’m sure Obama will do something about this as soon as he hears this news.

slickwillie2001 on December 3, 2013 at 2:31 PM

He already did. Didn’t you hear one of his 2012 campaign slogans: Obama killed bin Laden, and saved Detroit!

(He never said how long it would stay “saved” and he never told taxpayers that it was their money — and many billions and billions of dollars of it — that he used to temporarily “save” the Detroit unions, at least past election day).

AZCoyote on December 3, 2013 at 5:19 PM

According to Councilwoman JoAnn Watson, Detroit voted for Obama, and now it’s payback time.

“After the election of Jimmy Carter,” she said yesterday, “the honorable Coleman Alexander Young, he went to Washington, D.C. and came home with some bacon. That’s what you do. That’s what you do.”
“Our people in an overwhelming way supported the re-election of this president and there ought to be a quid pro quo and you ought to exercise leadership on that,” she claimed. “Of course, not just that, but why not?”

i know one lady detroit could fire and save some monies….

“if you like your Detroit you can keep your Detroit”….BHO

going2mars on December 3, 2013 at 5:51 PM

after the city pension and union checks bounce..
how far behind is the first riot??..

Detroit=Debt+Riot

going2mars on December 3, 2013 at 5:55 PM

Okay, hold up your map of MI (aka your left hand). Detroit is about at the base of the outside of your thumb. ;0

Seriously, I know you were joking but when I lived in MI I was surprised at the number of people who would use this aid to describe where stuff was. MI, BTW, is also a great-shaped state if you want to make oven mitts for tourist gift shops.

Happy Nomad on December 3, 2013 at 2:01 PM

Aren’t ya glad that guys from Florida don’t do that…?

PointnClick on December 3, 2013 at 6:23 PM

http://m.washingtontimes.com/multimedia/image/10312013_china-nuke-strike8201jpg/

Even China won’t invest in Detroit.

WryTrvllr on December 3, 2013 at 6:27 PM

And now, Chicago, California, Illinois…

xrayiiis on December 3, 2013 at 6:51 PM

Aren’t ya glad that guys from Florida don’t do that…?

PointnClick on December 3, 2013 at 6:23 PM

That would make the keys……..

WryTrvllr on December 3, 2013 at 10:25 PM