Detroit Emergency Manager Kevyn Orr’s office has released a statement about the city’s Plan of Adjustment and Disclosure Statement filed today in U.S. Bankruptcy Court.
Here’s what the city considers the highlights of the plan:
* Devotes $1.5 billion over 10 years to capital improvements, blight removal and equipment and technology upgrades.
* During the next five years, up to $500 million of the $1.5 billion will go toward blight removal.
* Proposes 20 percent payment to unsecured, non-retiree creditors in the form of new securities from the city and a pledge to increase that if the city’s finances improve.
* Assumes $465 million from third-party donors and the Detroit Institute of Arts toward the pension funds over two decades, subject to city and pension fund agreement and conditions.
* Includes Gov. Rick Snyder’s proposal to send $350 million of state money to Detroit over 20 years.
* Allows that if police and fire pensioners agree to the plan and there is some settlement with the state, they could receive more than 90 percent of their pensions with the elimination of cost-of-living allowances. General retirees cold receive in excess of 70 percent of their pensions after elimination of cost of living allowances.
* Moves current city employees into defined benefit plans.
In other development, mediations continue toward agreements with key creditors in the process overseen by Chief U.S. District Judge Gerald Rosen. Talks are ongoing for the interest-rate, pension debt swaps agreement as well as the future of the Detroit Water and Sewerage Department.
Was Detroit even eligible to file for bankruptcy?
Today the 6th Circuit Court of Appeals agreed to answer that question, raised by a group of pensioners. The panel in Cincinnati said it would hear the group’s appeal which is a challenge to the December decision from Bankruptcy Judge Steven Rhodes who ruled Detroit was authorized to pursue its landmark bankruptcy case.
For the time being, the 6th Circuit is not expediting the appeal.
“It’s definitely an encouraging development in the case. The 6th Circuit in its order said that the issues in the petition relevant to eligibility warranted direct appeal primarily because they are a matter of such public importance,” says Ryan Plecha, an attorney representing retired city workers including police and fire.
Plecha says there is no timeline for the appeal process set. He and other attorneys representing city employees will continue mediation talks with the city while their appeal of the bankruptcy. “Uncertainty remains as to what the ultimate decision or ruling will be,” he says. ‘This is a very promising event.”
Here is the pensioners’ petition for permission to appeal:
If you listened to Wayne County Executive Robert Ficano’s State of the County speech this week, you heard about cost-cutting measures underway to reduce a $175 million deficit. But will those be enough to keep the the state’s most populous county out of some kind of financial emergency?
The Detroit News’s Daniel Howes examines the county finances, politics and other factors that may be pointing to an inevitable conclusion in this story.
“This, dear county unions, sheriff and prosecutor, is where you don’t want to end up,” he writes.
Detroit has a third settlement agreement that would end its costly interest-rate swaps. An attorney for the city this morning says the city plans to file the deal in the next few days. Bankruptcy Judge Steven Rhodes has twice rejected similar proposals, calling them too expensive for the city and too generous to the creditors: UBS AG and Merrill Lynch Capital Services.
Here is the Reuters story about the agreement.
The Detroit Free Press posted this piece.
Michigan Radio’s Jack Lessenberry has a few predictions about Detroit’s plan of adjustment, expected to be filed in bankruptcy court this week. On “This Week in Michigan Politics,” Lessenberry and Christina Shockley discuss potholes, an effort to raise Michigan’s minimum wage and the upcoming trial challenging marriage equality in the state as well as the city’s plan of adjustment.
“It’s probably going to include pension cuts,” Lessenberry predicts. “it’s probably not going to include looting the DIA.”
The city’s bankruptcy filing and resulting legal tangles, mediation and early restructuring discussions have already had an impact on business practices, legal structures, general obligation bonds and public pensions, the Detroit Free Press reports today.
Reporter Nathan Bomey examines four ways Wall Street is changing because of Detroit’s dynamics. “Wall Street is quickly changing how it views municipal debt in the midst of the largest municipal bankruptcy in U.S. history,” he writes. Detroit “could uproot traditional financial principles about investing in public bonds, once thought to be rock-solid debt.”
In what could have been the “Bankruptcy Combined” event, a team of academics, researchers, lawyers and municipal finance experts broke down and analyzed some of Detroit’s bankruptcy issues in a Tuesday event that’s now available in on-demand replays.
If you’re a fan of privatization and data-driven decisionmaking, you’re a teammate of the presenters, drafted by the American Enterprise Institute in Washington D.C.
If you’re an unwavering union supporter or waving the flag of home rule, this team is going to raise your blood pressure.
Pensions, bonds, private-public partnerships, patterns of urban de-population and housing devaluation: All were explored in the two-hour session. Presenters reiterated the national implications of Detroit’s situation of declining population and revenue and lack of restructured services, operations and debt obligations.
“One reason it’s so important is because there area bunch of other cities that are in the same predicament,” says David Skeel, professor of corporate law at University of Pennsylvania and one of the presenters. To Skeel, it’s “pretty clear” the pensions will be restructured in Detroit’s post-bankruptcy plans.
The mere possibility that Detroit could default on municipal bonds defies history, according to John Mousseau, executive vice president and director of fixed income and a municipal bond portfolio manager at Cumberland Advisors in Sarasota, Fla. Less than one half of one percent of bonds have defaulted in the history of municipal markets, according to Mousseau. So the discussion about Detroit’s restructuring of its bond obligations means “we’re more or less in uncharted territory,” Mousseau says.
Other panelists were Michael Barone, senior political analyst for The Washington Examiner and a resident fellow at AEI, R. Richard Geddes, associate professor in the department of policy analysis and management at Cornell University, and Andrew Biggs, resident scholar at AEI.
The entire two-hour event is available at http://www.aei.org/events/2014/02/18/the-detroit-bankruptcy-conflicts-and-implications/
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com
As we anticipate the release of the city’s Plan of Adjustment in the coming week, here are five stories from the weekend that Next Chapter Detroit doesn’t want readers to miss:
In advance of the city’s restructuring plan, expected in court this week, Stephen Henderson, editorial page editor at the Detroit Free Press, predicts: “If Detroit’s emergency manager has his way, the city will walk from nearly 80% of its debt to banks and insurers. Most important, he will treat bondholders, including those whose debt has never been subject to principal write-downs in a bankruptcy, the same as every other lender.”
The New York Times “Vocation” feature talked with a Detroit police officer about what it’s like to patrol the streets of the bankrupt city and live with the uncertainty of the city’s future finances.
The American Enterprise Institute weighs in on the history and future of Detroit’s pension systems and concludes, in part: “It’s hard to know what should be done about Detroit’s pensioners, many of whom would truly be impoverished if subjected to major benefit cuts. But the conventional morality play painting Detroit’s employees as mere bystanders to the city’s fiscal bankruptcy is clearly wrong.” AEI will host a panel discussion in Washington D.C. Tuesday afternoon titled “The Detroit Bankruptcy: Conflicts and implications” that will stream online. More information at: www.aei.org/events/2014/02/18/the-detroit-bankruptcy-conflicts-and-implications/
The Wall Street Journal provides a succinct explanation of what U.S. District Court Chief Judge Gerald Rosen is doing behind the scenes of the bankruptcy negotiations.
Have you wondered exactly how the Detroit Blight Authority is mapping all the city’s properties? Crain’s Detroit Business profiles Loveland Technologies Inc., the new company with new technology … and a new approach.
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org