Detroit Emergency Manager Kevyn Orr is transferring control of the city’s government back to its elected officials, a major shift of power in the city that’s still in bankruptcy proceedings.
Orr’s order, which details the role he will play and what powers he will have, came after 16 hours of closed-door negotiations involving him, the bankruptcy case’s chief mediator, Mayor Mike Duggan, City Council and other officials. Under Michigan law, the city council could have voted to remove Orr with a two-thirds vote.
Orr will continue shepherding the city through the historic Chapter 9 case, the largest ever municipal bankruptcy. Duggan says he will now, finally have the authority to do the job he was elected to do. “While I had a good professional relationship with Mr. Orr, every single action I took was still subject to his approval,” Duggan says.
Orr will retain the title of emergency manager until the city’s plan to exit bankruptcy is approved and implemented.
In Detroit’s bankruptcy trial, it’s mainly financial creditors challenging the city’s restructuring plan. But another, smaller group of people say they’re owed money and want their claims to be allowed to proceed. WDET’s Sandra Svoboda spoke with Attorney Bill Goodman about his clients, their civil rights lawsuits against the city, and how they are tied up in the bankruptcy case.
Here is the audio of their conversation. The full transcript appears below.
Here is the lawsuit Katie Williams’ estate filed.
Bill Goodman: I represent Walter Swift, a man who was wrongfully and falsely convicted of rape and went to prison for 26, 27 years until he was exonerated and is now free and suffering from the effects of the fact that his life has been stolen from him. I represent Katie Williams, a victim of domestic violence who also happened to be a Detroit police officer whose husband and violator was also a Detroit cop and whom the Detroit police department and other police departments let get away with murder. Literally.
Sandra Svoboda: What kind of lawsuits have they filed?
BG: They have filed actions against individual police officers and the city of Detroit under a federal statute known as the Civil Rights Act of 1875 which actually goes back to 1866, which was passed in conjunction with the 14th Amendment to the United States Constitution. They’re asking for damages. They’re asking for punitive damages and they’re asking for attorneys’ fees, all of which they’re entitled to under section 1983 of the Civil Rights Act.
SS: And what’s happened to their cases during the bankruptcy?
BG: They have been sadly and tragically stayed. They haven’t been able to take the depositions that they need to take. They haven’t been able to get the documents they need to get. They haven’t been able to proceed with their cases because of bankruptcy.
BG: Because Judge Rhodes entered an order staying all proceedings in these cases, which he’s entitled, theoretically, entitled to do under Chapter 9 of the Bankruptcy Code, which we say violates their rights under the Constitution of the United States.
SS: So your clients, and of course there’s a handful of others with similar claims, basically we’re seeing their Constitutional rights, their civil rights claims clashing with the bankruptcy law in the proceedings. Is that an oversimplification?
BG: No. I don’t think it’s an oversimplification. It’s true but actually their rights are not merely clashing with the bankruptcy code or the rights of the city of Detroit and others under the bankruptcy code, their rights have been virtually eliminated by the bankruptcy code and they’re entitled to 10 cents on the dollar or whatever pathetic sum creditors are entitled to now, unliquidated creditors.
SS: Have we see civil rights claims like this in other municipal bankruptcies?
BG: Yes, but the issue of whether it is Constitutional for a court to diminish people’s rights under the civil rights laws has never been decided. It’s been raised for the first time by my clients and others following my clients’ lead.
SS: Judge Rhodes, of course, asked for and got a ruling from the U.S. Attorney General about where the civil rights issue stands in relation to bankruptcy and constitutional claims. As I remember you weren’t too happy when the Attorney General’s opinion came out.
BG: The Attorney General’s opinion, which was really an opinion from the Solicitor General under the Attorney General, said that we’re not entitled to any different treatment than any other unliquidated creditor, not withstanding the fact that we brought a claim under the United States Constitution. This was bad. This was false, it was wrongheaded, and it was a disgrace for the United States Department of Justice to file such a brief.
SS: What are your clients seeking?
BG: They’re seeking full compensation. If you’ve been in prison for 27 years for a crime you didn’t commit and everyone knows that it was a crime you didn’t commit and you’ve been exonerated, and the police officer who arrested you has filed an affidavit that said you didn’t do this crime, you were wrongfully convicted, you should be compensated. People in other states against other systems are averaging a million dollars a year for these wrongful convictions. Walter Swift by that analysis is entitled to 10 cents on the dollar at most and not until 10 years from now.
SS: Because of the bankruptcy case?
BG: That’s right. Because of the alleged constraints of Chapter 9 in the bankruptcy code.
SS: Why is he different than any other financial creditor with a claim against the city?
BG: Because his rights have been brought under the Constitution of the United States. That means that to deprive him of those rights deprives him of constitutional rights and it’s an unconstitutional action. Whether it’s an action by Judge Rhodes or by the City of Detroit, it violates his constitutional rights and cannot be accepted.
SS: Where do things stand now and what do you think will happen to resolve your case?
BG: We have an objection filed in front of Judge Rhodes, which he has to decide, which says we want him to say, “That’s right. Your clients’ rights, Mr. Swift’s rights are protected by the Constitution and I cannot in a bankruptcy court, cannot interfere with them, diminish them in any way.” That’s where it stands right now, and we hope and expect and fully anticipate that we will be vindicated and Judge Rhodes will rule with us on this.
Local journalist and historian, Bill McGraw has an article in this month’s National Geographic magazine about how nature has reclaimed some of Detroit’s trash dumping areas. McGraw says many illegal and legal dumping areas in Detroit that have been neglected are sprouting trees, grass and ponds. But McGraw says the city is working on cleaning up sites that remain active dumping sites. Here he is on Detroit Today.
As a federal judge continues to hear arguments for-and-against Detroit’s plan to exit bankruptcy, a new player is weighing its potential investment in the city. That player is the state of Israel. WDET’s Quinn Klinefelter talked with Israel’s Consul General to the Midwest – Roey Gilad – about the potential economic connections between Detroit and Israel, and how that nation views the US strategy to fight the group calling itself the Islamic State.
Detroit’s bankruptcy trial is postponed for a week but Judge Steven Rhodes is holding a hearing Monday on the issue of water shut offs.
In July, he heard from several people objecting to the city’s Plan of Adjustment. Some of them complained about the cancellation of water service to customers with unpaid bills, and following their testimony, the judge raised questions about the shut-off procedure.
Now, a coalition of individuals, welfare rights groups and lawyers are asking the judge to issue a restraining order … and prevent the city from shutting off water service. They argued the written motion in court hours before the bankruptcy trial started, and the judge ordered both sides to file more documents before he would decide.
Since then, both sides have complied, and Rhodes scheduled Monday’s hearing for oral arguments. The coalition asking for the halt to shutofs has 34 witnesses listed for the hearing.
City attorneys say such an order from the bench would be unprecedented in a bankruptcy case as it interferes with the daily operations of the water department. They also object to a blanket ban on shutoffs because some water hook ups are illegal.
The city is asking the Judge Rhodes to dismiss the request. Here’s that motion. But, assuming the hearing continues, the city also has several witnesses and exhibits ready to present at Monday’s hearing.
Last week the judge said he would hold an evidentiary hearing on Monday. NextChapterDetroit.com will be there.
Detroit Today looks at the financial challenges facing the new regional water authority with Crain’s Detroit Business reporter Chad Halcom. Halcom’s recent article in Crain’s Detroit Business lays out the financial issues facing the Great Lakes Water Authority, the new regional authority formed as part of the Detroit bankruptcy proceedings and negotiations.
Detroit’s bankruptcy process has produced a tentative agreement for a new regional water authority. While there are political, economic and practical matters to work out, one local lawyer and environmental advocate hopes the deal leads to cleaner and greener operations. WDET’s Sandra Svoboda spoke with Nick Schroeck. He’s the director of the Transnational Environmental Law Clinic at Wayne State University Law School.
Nick Schroeck: With our environmental law clinic we’ve been working for the past several years on the pollution discharge permit from the Detroit Water and Sewage District where they discharge into the Rouge and Detroit rivers. So we’ve been working on making sure that they’re meeting their compliance. and that process has actually been ongoing for about 30 years where the city of Detroit was under federal oversight from federal courts because of this combined sewage overflow problem that we had. That means that our storm drains are connected to our sanitary sewers so when you have big rain events we would have these discharges: untreated sewage going into the Detroit and Rouge rivers. That’s really the focus. We’ve been working on trying to clean up those combined sewer overflows and through that we’ve gotten involved in the bigger picture of what’s happening with the Detroit Water and Sewer District.
Sandra Svoboda: And what’s happening with it has certainly been in the headlines in the last week with the new agreement for the Great Lakes Water Authority as part of the bankruptcy settlement.
NS: What we’re, I guess, hopeful about through this Great Lakes Water Authority is the idea we’re going to be investing $45 million a year into infrastructure. So that means we’re going to be doing work on fixing leaky pipes. We’re going to be doing work on making sure the sewage treatment plant is running at its optimal level. There is a lot of equipment there that is way past its expected life span and so hopefully those investments will make sure the plant operates at an optimal level which means fewer discharges, fewer problems, fewer amounts of pollution going into the Great Lakes.
SS: What do you think the priorities should be for the department?
NS: Well the main thing is providing good quality, safe drinking water to the region, and I think so far we’ve done a pretty good job, the collective we, of making sure that happens and really we do provide a good product. The water that we get is actually a pretty quality thing that we get but the No. 1 priority is making sure the systems are in place and the investments are made to ensure that we limit the amount of leakage where we have broken leaking pipes and we’re just wasting treated drinking water that’s going into the ground or going where it shouldn’t be. Fixing those leaks, making sure the system operates at an optimal level. As well as investments in the wastewater treatment plant where we still are having these combined sewer overflows when we have significant rain events.
SS: And how they can best do that keeping an eye on the green-ness of it all?
NS: Green infrastructure is something that we’ve seen adopted in other states. Philadelphia has a massive green infrastructure program that they’re working on. Other cities in Michigan like Lansing and Grand Rapids have invested a lot of money in green infrastructure, and when I say that it means things like diverting storm water. Instead of going into a pipe, we’re going to put it onto a parkland or open green space. We do have a significant amount of vacant property in the city of Detroit and there’s ways to utilize that property in an attractive way where the community has buy in and they look at it and say it looks like a park most of the time but occasionally it will be flooded when you divert stormwater there during a rain event. Those kinds of projects. Things like disconnecting downspouts from storm drains on people’s homes, even vacant homes. A lot of vacant homes still have downspouts that are connected to the storm drain, and that water just runs in there and causes problems at the wastewater treatment plants. Rain gardens: encouraging people to handle stormwater differently on their properties as well as we have a lot of surface parking lots in the city of Detroit, maybe transitioning those to the type of payment that allows water to seep into the ground instead of just running off into the storm drains. All those kinds of green practices are ways to keep stormwater from going to the treatment plant and save some money because it’s much less expensive that putting a big pipe under the ground.
SS: You sound fairly hopeful about the opportunities this deal might bring for infrastructure. Do you have reservations about anything?
NS: As you remember from your work with NextChapterDetroit.com, we actually sent a letter in several months ago asking for some transparency in the negotiations and discussions over the future of the water department. There’s a lot of concerns about staffing, whether or not jobs are going to be eliminated and cut. There’s been discussions going back for a couple of years about how they can kind of resize or rethink the wastewater treatment plan. But that means you’re talking about people’s jobs and their livelihoods, and so we want some transparency about that. We want discussions about who’s ultimately going to be responsible for making decisions about green infrastructure investment versus the old traditional grey infrastructure. Are these going to be public and open discussions? The new Great Lakes Water Authority. Are they going to have open meetings? Are they going to be discussing contracts, purchase agreements, that type of thing in public or is that going to be done behind closed doors? We really want transparency. We pay rates that support the system. There are user fees that are going to go into funding this infrastructure. That’s public money, public dollars and we should have a seat at the table and at least have openness and transparency so we all know these decisions are being made in the best possible light.
The chief mediator in the Detroit bankruptcy case has ordered several creditors — including the last major one opposing Detroit’s bankruptcy plan — into closed-door negotiations with the city.
Resolutions could bring an end to the nation’s largest-ever municipal bankruptcy. Under the city’s plan to exit bankruptcy two bond insurers – Syncora and Financial Guaranty Insurance Company– stand to lose more than $1 billion. In the ongoing trial over the plan they’ve argued the city was illegally favoring other creditors and avoiding selling assets like the collection at the Detroit Institute of Arts.
But this week Syncora changed sides – backing the bankruptcy plan in exchange for a larger return on its claims and incentives worth millions of dollars. Still that deal hinges on two banks that have already settled with the city to release Syncora from insurance claims.
U.S. Chief District Judge Gerald Rosen, who is the chief mediator in the Chapter 9 case, issued this order Wednesday sending parties in that deal into mediation.
On Thursday, Rosen ordered FGIC into negotiations with the city and several other creditors, including the Official Retirees Committee, that will continue “day-to-day thereafter as deemed necessary, until released by the mediators.”
News of the Syncora deal broke Tuesday evening, and attorneys for the city and the Bermuda-based company on Wednesday asked the judge to postpone the bankruptcy trial. During the court hearing, several attorneys made statements on the record about the deal.
Here’s what FGIC’s attorney said during that hearing.