Next Chapter Detroit brings you a few of the bankruptcy-related stories from the previous week in the local and national media:
The Million-Dollar Housing Market?
The city’s auctioning of abandoned homes has generated more than $1 million in commitments, city officials reported this week.
“The success of these auctions is another reminder of just how much demand there is for good homes in Detroit’s neighborhoods,” Mayor Mike Duggan said statement on June 26. “Within a matter of months, these vacant houses will become homes that will be adding to the strength of our neighborhoods.”
As The Detroit News reports: Since May 5, the city has been selling homes on the www.buildingdetroit.org. The first auction generated 88 bids with a high of $34,100. For the past month, the land bank has been selling two homes per day.
Speaking of Moving In…and Out of the City
The New York Times and the Wall Street Journal published stories this week about whether Detroit’s population continues to move out or grow with new residents. The WSJ’s Marketwatch blog takes a somewhat analytical approach, comparing cities across the country on the basis of home affordability, tax rates and unemployment. Of course, the piece is also peppered with colorful anecdotes about Detroit’s reality with a hopeful tone.
The Times, though, includes “up high” some of the facts that seem to fascinate much of the country: Detroit’s foreclosure rate (one in 10 properties this year) and the occasional starting auction price of $500 for a house. The Times also notes Detroit’s unusually high tax foreclosure rate, linking it to the city’s financial woes:
“In some cases, homeowners have abandoned properties and simply quit paying taxes, and foreclosure may be the only way to get a house back into the hands of people who actually want to live there and pay their share. In other cases, those who lose or abandon their houses sometimes end up buying other houses at auction – sometimes for as little as $500 – and begin the cycle again, although new rules are aimed at taking back properties sooner if taxes are again not paid. Either way, the city fails to get all the tax revenue it is owed.”
Lighting Up Detroit
The June 25 sale of $185 million worth of revenue bonds for Detroit’s public lighting authority “had no problem finding buyers,” Reuters reports.
“The bond issue, which was sold through the Michigan Finance Authority, was 2.5 times oversubscribed, receiving 35 institutional orders and several dozen more from retail accounts, according to a statement from Michigan officials.”
In December, Citibank financed about $60 million in floating-rate bonds for the lighting system. The June 25 sale was the first public offering of Detroit debt for lighting since then, Reuters reports.
What the Detroit bankruptcy “teaches” the rest of the world continues to be a common theme in media coverage and conversations about history’s largest Chapter 9 filing. This week, the Wall Street Journal’s Bankruptcy Beat blog covers some.
Perhaps predictably, the WSJ did not address communicating with citizens or ensuring the process is explained as fully as possible for residents or retirees. But the “takeaways” author identifies are worth “putting on the record” as lawyers and journalists say. They are:
Negotiate and make every attempt to avoid Chapter 9, but do not forego its potential rehabilitative benefits.
Seek to organize creditor groups as soon as practicable and engage in meaningful negotiations.
Understand the nature, full extent and potential value of the assets of the troubled municipality.
Prior to any formal proceedings, develop a projected restructuring and business plan that would be feasible and would comply with the applicable principles and rules that govern Chapter 9.
Establish, as early as practicable, the involvement of the state government as a party in interest.