Detroit Bankruptcy Trial Begins

Testimony in the historic Detroit bankruptcy trial began this morning with the city’s chief financial officer stating fiscal controls were “very, very poor” when he began last year.
John Hill Jr. was the first witness called on September 4. According to Hill, Detroit was unable to fully determine revenue flow for a myriad of reasons, but partly due to a failure to implement a “financial commuter system,” as said by ABC News.
Lawyers for the United Auto Workers, Wayne County and the American Federation of State, County and Municipal Employees are also slated to present their arguments on Thursday.
On Wednesday, lawyers argued against Detroit’s current debt modification plan, claiming it to be “illegal, unfair and dead on arrival,” according to an article in the Detroit Free Press.
Judge Steven Rhodes compelled a lawyer for Syncora Guarantee, arguably the city’s strongest critic and creditor, to state what he felt is an appropriate amount for the city to repay. Attorney Kieselstein said Syncora wants 75 cents on the dollar.
Detroit’s Grand Bargain is the foundation of the bankruptcy plan. The bargain would allow the city to accept roughly $816 million over the next 20 years from the state of Michigan, non-profit foundation and the Detroit Institute of Arts donors. The money would be used to fund city retiree pensions.
Bond insurers claim the Grand Bargain illegally discriminates against commercial creditors. Syncora claims it is owed $400 million.
Rhodes has scheduled the trial into mid-October to give enough time to determine the fairness of the Grand Bargain and what is most reasonable for all parties. City leaders, including Mayor Mike Duggan and emergency manager Kevyn Orr, are expected to testify throughout the trial.
Detroit filed for Chapter 9 bankruptcy protection July 18, 2013, claiming debts and estimated long-term liabilities totaling $18 million.
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