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Detroit, Michigan nears Chapter 9 Bankruptcy [UPDATED]

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posted on Dec, 7 2012 @ 03:55 PM
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www.detroitnews.com...

Granted this is on the Opinion page, but it's based on what is likely going to happen sooner rather than late in a City when the local government seems unable to do what needs to be done to get the City on the road to recovery.


The case would be filed under Chapter 9 of the federal bankruptcy code, according to two ranking sources familiar with the situation, following efforts to reach prenegotiated settlements with as many key creditors — unions, vendors and pension funds among them — as possible before any filing.

"Clearly, we will always try to do that," one source familiar with the situation said in an interview Thursday. "You can move on a much more expedited basis if you can demonstrate that your cash is running out" — as Detroit clearly is with each passing week.

The evolving bankruptcy scenario is a clear signal that Gov. Rick Snyder and Treasurer Andy Dillon have lost confidence in the ability of the mayor, his management team and council to honor their commitments under the eight-month-old consent agreement with the state, or to make any meaningful progress on restructuring.


From The Detroit News: www.detroitnews.com...


I don't know anything about Chapter 9 proceedings...and hopefully some ATSers can fill in the blanks.
en.wikipedia.org...
www.uscourts.gov...
www.ehow.com...

As an interesting aside, Michigan today is getting ready to make Michigan the next Right to Work State......

More info as I find it.....


edit on Fri Dec 7 2012 by DontTreadOnMe because: (no reason given)
edit on Fri Dec 7 2012 by DontTreadOnMe because: clarity

 

UPDATE
Financial Advisory Board supports emergency financial manager for Detroit
edit on Mon Dec 10 2012 by DontTreadOnMe because: (no reason given)




posted on Dec, 7 2012 @ 04:15 PM
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Detroit’s bankruptcy will mean it can "renegotiate" any of its contractual obligations with its creditors. Under a standard bankruptcy, the court appoints a trustee who manages the finances of the bankrupt entity and tells their creditors what portion of their outstanding debt they can expect to be paid. There are usually secured and unsecured creditor, the difference being who gets paid first with the money available.

I don’t know about a municipal bankruptcy, the following parties would be impacted the most:

Detroit municipal bondholders probably won’t be effect too badly. Municipalities realize they need to borrow money and without people willing to loan them money they find that operating a city is nearly impossible. But then again this is Detroit, so who knows what priorities the politicos there have. Fortunately , whether the state of Michigan appoints a trustee or the courts do, someone with no skin in the game will be making the decisions.

Current municipal workers will have all their contracts up for “renegotiation”. Any promises made to unions are dissolved, and the trustee can impose whatever terms they feel the city can afford.

Former municipal workers will have their pensions and health care benefits clipped. Once again, how much is determined by what the trustee believes the city can truly afford.

Detroit’s been run into the ground by a successive parade of incompetent crooks for the past 40 years, this is the inevitable outcome.



posted on Dec, 7 2012 @ 05:24 PM
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reply to post by SirMike
 


Even if the pension fund is solvent?
Since Detroit itself doesn't manage the Funds....they are much sounder than the City.
The General Pension Fund was about 80% self-funded last time I checked.



posted on Dec, 7 2012 @ 08:32 PM
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reply to post by DontTreadOnMe
 


I hate to see this, but it may be what is necessary for the city of Detroit to get back on it's feet. I don't know what the differences are between an individual and a city bankruptcy filing, but I do know people who have filed bankruptcy and within a few years were better off (financially) than they had ever been previously.

I remember when I was a child my dad and uncles all worked in Detroit for almost two years. A big chunk of our "clan" moved up and stayed in Algonac. I watched the ice breakers clearing the St.Clair river out of my bedroom window every morning during the winter- I loved it there!



posted on Dec, 7 2012 @ 08:55 PM
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I've listed to local commentary on the radio about this topic these past few weeks, and the need for an Emergency Manager appears to be well on its way. This has been discussed for months ad nauseum, but the facts are that the City of Detroit is bankrupt. Homelessness and unemployment is commonplace.

Crime has always been a serious problem in the city, but the violent crime is getting much, much worse lately. You know it's bad when robbers show up at local gas stations with AK47's in hand.

In the past few decades, the city's population has dwindled considerably. You simply don't have the sheer number of property owners paying taxes as in decades past.

The infrastructure in the city is falling apart everywhere. Houses are in unlivable conditions, and commercial buildings are eyesores.

The problem I have with this whole scenario is that there is a lot of discussion about selling assets. That's not the solution. The solution is cash flow, and the only way you create the cash flow necessary to revive the city is to do the following:

1.) Make the city hospitable to businesses and entrepreneurs. Restructure the anti-business tax code to attract high quality manufacturers back to the city. The infrastructure is already in place - It just takes some retooling, and renovations to make some of these commercial buildings productive again.
2.) Put people back to work. This will reduce crime. You have many hard-working people in metro-Detroit, and people who want to work.
3.) Increase the police force to aggressively clean up the drugs, gangs, and criminal activity in the city. Security is paramount to attracting people back to the city. Police need to be visible and in full force.
4.) With more jobs, and lower crime, you then need to tackle the incredibly lackluster schools. This has been an ongoing challenge, as the schools have had the worst amount of corruption in years past.
5.) Tear down the vacant houses and buildings, and rebuild the infrastructure. Drug houses need to be torn down, and vacant commercial buildings need to be torn down.
6.) Change the culture. Attract a wide range of diversity back to the city, including more immigrants of various nationalities and more entrepreneurs.

Jobs, lower crime, and good schools will do a lot towards attracting families back to the city. Right now, Detroit is a scary place.

And, with all due respect to the Mayor and the City Council, I really don't see much happening on any of these fronts. As I drive through the city daily, I see the homelessness, the graffiti everywhere, the vacant and destroyed buildings. Casinos and strip clubs have become commonplace. I hear daily about the crime levels. It's crazy living here.

I don't know if the situation will ever change in my lifetime. I wish we would stop investing in rebuilding Iraq and Afghanistan, and rebuild the city of Detroit.



posted on Dec, 8 2012 @ 03:31 AM
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Originally posted by DontTreadOnMe
reply to post by SirMike
 


Even if the pension fund is solvent?
Since Detroit itself doesn't manage the Funds....they are much sounder than the City.
The General Pension Fund was about 80% self-funded last time I checked.


In a recent string of municipal chapter 9 filings in California, pensions were cut in every case. I'd have to assume that given the city's dire straits, even with a meager 20% stake, they'll be cut here as well.

As a former resident of the city, what has occured there over the last 45 years is tantamount to a crime against civilization.
edit on 8-12-2012 by HabiruThorstein because: typo
edit on 8-12-2012 by HabiruThorstein because: grammar



posted on Dec, 8 2012 @ 08:47 AM
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reply to post by CookieMonster09
 




I had had high hopes for Michigan to become a world leader in 21st cen energy research. Poop and biomass and algae might be laughable to some, but some thought the automobile was a crazy idea.



posted on Dec, 8 2012 @ 09:12 AM
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Many a town in the west have turned into Ghost Towns since the 1800's, Detroit, could go the way of these in time. Only on a much grander scale. It's a dead city, and entitlements have dried up the last drops of blood. Who In their right mind would stay...



posted on Dec, 8 2012 @ 10:18 AM
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reply to post by DontTreadOnMe
 

Cities and towns, they are not companies, how can they bankropt? The same as countries?
Something stinx in such a way of thinking? To sell the whole city, or town, as slaves?



posted on Dec, 8 2012 @ 10:43 AM
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Two options to save Detroit:

-Federal Receivership

-Pee off China so bad they bomb Detroit into the ground and we make them pay 'Reparations' to rebuild it.


Option 2 is the one they're doing right now. I personally don't think China would waste a bomb on it.



posted on Dec, 8 2012 @ 11:07 AM
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reply to post by DontTreadOnMe
 


Don't mind the people attacking Detroit all the time.

They're just lost as what to do with the bigoted/arrogant outlook that they grew up with. I've noticed some pretty nasty remarks about Detroit on this forum and usually from people who don't live in Detroit (neither do I but I don't make nasty comments either!).



posted on Dec, 8 2012 @ 11:13 AM
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Pee off China so bad they bomb Detroit into the ground and we make them pay 'Reparations' to rebuild it.


The city needs to be rebuilt, no doubt. But the idea of burning the city to the ground is deplorable imagery. The people of the city of Detroit need compassion, not hatred. These are for the most part good people caught in deplorable levels of poverty, extreme violence, and surrounded by drug wars and gangs. They are entrapped in a culture of corruption, violence, and hopelessness.

There are strong business leaders that are investing in the city, and many in metro-Detroit that are doing all they can to make the city better. As fellow Americans, we need to be empathetic and compassionate, and try to help these fellow Americans get through this incredible predicament.

We have - in some parts of Detroit - conditions akin to bombed out, war-torn destruction. I mean this literally. You can visibly see these commercial buildings from the freeway. Buildings with all the windows broken, utterly destroyed on the inside and outside, and graffiti everywhere. It's not only unpleasant to view from an aesthetic point of view, but also terrible from other perspectives: economic, psychological, health-wise, etc.

If we can rebuild infrastructure in Baghdad, why can't we rebuild Detroit? Why are we spending billions of dollars rebuilding foreign cities, when our own cities are in deplorable condition?

I've made mention of this before: Even those institutions that would normally come to the aid of Detroit in similar situations are incredibly corrupt. I have posted in other threads about the Archdiocese of Detroit, and how a single archbishop siphoned over $34 million dollars from metro-Detroit parishioners to build the boondoggle John Paul II Cultural Center in Washington, D.C. which sat vacant for practically a decade and cost the parishioners $60,000 per month in maintenance costs. These are funds that could have been used for local soup kitchens, homeless shelters, and keeping our Detroit-area churches and parochial schools open. So, even your most basic philanthropic and charitable institutions are incredibly corrupt in Detroit.



I had had high hopes for Michigan to become a world leader in 21st cen energy research. Poop and biomass and algae might be laughable to some, but some thought the automobile was a crazy idea.


There are still a lot of very bright, intelligent people that live in metro-Detroit. The brain power is there, but the city itself is generally poor, uneducated, and caught up in a terrible cycle of hopelessness. You have to make massive changes in the culture, the infrastructure, and the crime rate for the city to make a comeback.



posted on Dec, 8 2012 @ 11:15 AM
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reply to post by CookieMonster09
 


Yes.

Yesssss.

Compassion, not hatred!

Why are some on this site so VILE?



posted on Dec, 8 2012 @ 11:26 AM
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Why are some on this site so VILE?

Well, perhaps they do not realize that as Americans, they are vested in the city's outcome. What happens in Detroit reverberates around the country.

When GM was in its hey day, it is estimated by some economists that every manufacturing job at GM resulted in creating at least 10 non-GM jobs. In metro-Detroit, for example, those men who did not work at the Big 3 automakers had jobs that were ultimately supported by clients that worked at GM. So, for example, the service industries such as grocery stores, hair salons, gas stations, restaurants, and the like all had their economic karma linked to the fate of GM.

It's the same for the rest of the country. As GM goes, and the city of Detroit goes, so goes the fate of the country. Like it or not, the fate of the city of Detroit will be the long-term fate of the country. The rest of the country is now only beginning to feel the malaise that the city of Detroit has felt for decades. A little taste of Detroit's woes are now being felt in far flung states that are far removed from Michigan.



posted on Dec, 8 2012 @ 12:33 PM
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reply to post by HabiruThorstein
 

Actually, I am hoping the State of Michigan just absorbs the City Pensions in that case.
Seems bizarre to punish that part that was fiscally responsible.



posted on Dec, 8 2012 @ 02:37 PM
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reply to post by DontTreadOnMe
 


The city is operating as a corporation; Chapter 9 proceedings fall under Uniform Commercial Code. All of the estate of the corporation is being secured by its "creditors", which we should ask big questions to who, for declaring bankruptcy and receiving their equity. Essentially, Detroit is a debtor under Uniform Commercial Code which carries very big consequences. Look into some of Jordan Maxwells stuff about UCC. Debtors are essentially slaves.



posted on Dec, 8 2012 @ 03:42 PM
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Actually, I am hoping the State of Michigan just absorbs the City Pensions in that case.

I guess it depends on how you look at the city workers. If you ask any business owner that has ever had to deal with the city, and its incompetent bureaucracy, you might not be rooting for these pensions. The incompetence and corruption is staggering.

The school system is the worst. When the brand new head of the school clean-up crew started to investigate the payroll, he found dozens and dozens of Detroiters on the payroll with full benefits that did not even work at the school in any form or fashion. Talk about criminality. But this is the kind of corruption that happens in this city. Why should these pensions be paid for these people, and why aren't they in jail for committing fraud on a grand scale, let alone the moral implications of depriving young school children of the resources needed for a sound education?

Not all city workers fall into this category, so I don't want to paint with a large brush. But there has been a ton of abuse of the system that will likely place the whole enchilada into jeopardy, including pensions.



Essentially, Detroit is a debtor under Uniform Commercial Code which carries very big consequences.


Indeed. The long-term consequences are dire. I don't know if an Emergency Financial Manager will even have the capacity to clean up the mess.

One of the common talking points in the media is how will the Emergency Manager divvy up assets. The concern is that bidding on assets will likely result in cronyism and even more political bribes and shenanigans. Unless assets are placed in a public auction format to the highest bidder, the Emergency Manager may be able to pick and choose who gets what.



posted on Dec, 8 2012 @ 05:04 PM
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reply to post by DontTreadOnMe
 


What a tragedy, from what I hear Detroit's no paradise, no reason for them to be swamped in that much debt they do have big industry out there.



posted on Dec, 8 2012 @ 07:05 PM
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Originally posted by CookieMonster09



Pee off China so bad they bomb Detroit into the ground and we make them pay 'Reparations' to rebuild it.



If we can rebuild infrastructure in Baghdad, why can't we rebuild Detroit? Why are we spending billions of dollars rebuilding foreign cities, when our own cities are in deplorable condition?



America no longer has the oil to make its own cars and keep Detroit. Saudi Arabia isn't selling us oil anymore, accepting the US dollar for oil.

Other countries CAN get oil....and is why we get vehicles from them instead. It's all about the oil. DOD used to be a BIG Detroit vehicle buyer.....now instead of buying vehicles from Detroit they switched to leasing vehicles and you can find them driving Hyundai's now. If our own military won't buy new vehicles from Detroit....ain't no saving it.

We've got a HUGE empire...cuts have to be made. I don't think there's even a factory making TIRES in America anymore. If you squint really hard I bet you'll find Chinese writing on DOD's tires they are rolling on. .....Gotta buy from countries WHO HAVE OIL. We don't.

The sole reason CNN's saying we are big exporter of oil right now is because they outsourced everything....cut the workforce to nothing so everyone's poor and there is a surplus of oil they can actually use as a tool to export. Costs of keeping a big Empire around the world.

Detroit ain't NEVER coming back. Neither are steel mills in America...tire factories....America will never even make Tampons ever again. They've been made in China for quite a few years.....all over oil.



posted on Dec, 8 2012 @ 07:29 PM
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America no longer has the oil to make its own cars and keep Detroit. Saudi Arabia isn't selling us oil anymore, accepting the US dollar for oil.

We have plenty of oil here in the U.S. We just have massive environmental restrictions that prevent us from tapping that oil. This is now a national security problem because we are at the whims of dictators and unstable regimes overseas that supply our oil.

It sure would be nice to know who put the big money behind the lobbying effort to put in place these restrictive environmental laws that prevent us from becoming energy independent. I guarantee you this big money is foreign.

We could be self-sufficient from an energy perspective if we had the gumption to do so. Our leaders are too weak or corrupt to make this happen.





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