Detroit Makes Final Arguments to Exit Bankruptcy

The city of Detroit urged a judge on Monday to approve its plan to get out of bankruptcy, calling it a sweeping effort to “solve some really bad problems” by wiping out billions in debt and spending $1.7 billion on better services in a long-term prescription for the Motor City.

In the largest public bankruptcy in U.S. history, Judge Steven Rhodes will decide on Nov. 7 whether Detroit’s plan is fair and feasible. Bruce Bennett, an attorney for the city, went through the key points and summarized evidence from a trial that began after Labor Day.

“Look where we are: 7 billion-plus coming off the books, massive deferrals” of other debt, he said. “This is exactly the relief Detroit needed, and it’s gone about it in the right way.”

Detroit, which has lost 27 percent of its population since 2000, can’t afford to raise taxes to get more revenue, especially from poor residents, Bennett said.

“It’s self-defeating behavior. … No one would come here. They would look at the tax assessments and say, `This will never end,’ ” he said.

Bond insurers with more than $1 billion at risk fought the city during much of the trial, but now are on the sidelines after settling for cash, real estate and long-term leases on certain assets. General retirees who had hoped the Michigan Constitution would protect them from pension losses agreed to a 4.5 percent cut last summer after Rhodes said there is no shield.

Private talks between Detroit and three counties are also leading to a spinoff of the water department into a regional agency.

Bennett said those features and others created a “comprehensive effort to solve some really bad problems.”

His remarks often were broken up by a back-and-forth with the judge, who raised technical points about how to apply legal precedent to the historic case, which was filed less than 16 months ago.

Rhodes asked about the risks of Detroit’s plan deflating in the years ahead.

Bennett agreed that nothing’s bulletproof. He said $1.7 billion pledged to improve basic city services over the next decade would greatly depend on the mayor and city council.

It has to be an “incredibly high priority,” Bennett said.

“We know what wasteful spending that does not advance the ball for this city looks like,” he said.

Bennett also talked about the “grand bargain,” an $816 million bailout by the state of Michigan, foundations and philanthropists to prevent the sale of valuable city-owned art at the Detroit Institute of Arts and avert even deeper pension cuts.

The museum “contributes to the image of the city. It might even contribute to bring residents back,” Bennett said. “It’s reasonable to keep the DIA assets, not liquidate them.”

Attorneys for the state of Michigan, retirees and pension funds also argued in favor of the city’s plan.

This article appeared in print in the October 28th, 2014 edition of Hamodia.