Bankruptcy Judge: Detroit Deal Nearly Miraculous
LINDA WERTHEIMER, HOST:
This is WEEKEND EDITION from NPR News. I'm Linda Wertheimer sitting in for Scott Simon. A federal judge has cleared the way for Detroit to emerge from crippling debt; the largest municipal bankruptcy in U.S. history. As officials celebrate, some residents wonder what the new Detroit holds for them. Quinn Klinefelter of member station WDET reports.
QUINN KLINEFELTER, BYLINE: When Michigan Governor Rick Snyder took control of Detroit's finances a year and a half ago and then approved the city going bankrupt, howls of protest erupted from residents and city officials alike. So few would've believed a news conference immediately after the plan to exit bankruptcy was approved would begin with applause.
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JUDGE GERALD ROSEN: But I want to start with Judge Steven Rhodes, bankruptcy judge Steven Rhodes.
KLINEFELTER: Detroit mayor, Mike Duggan, certainly was not applauding when he was elected to an office that was overseen by a state-appointed emergency manager, but Detroit's strategy to emerge from bankruptcy, shedding $7 billion of debt while investing more than a billion in city services over the next decade, has gone so smoothly even Duggan says he's impressed.
MAYOR MIKE DUGGAN: You look at what happened in Vallejo, California - a city the fraction of the size of the city of Detroit- it was over three years in bankruptcy and the length of the bankruptcy crippled that city to a point where it may never recover. To imagine the city of Detroit and the magnitude of the problems could've gone through this entire process in 16 months.
KLINEFELTER: The bankruptcy exit plan came together quickly in large part because the city turned those opposing it - big bond insurers who stood to lose billions - into partners with Detroit by offering them property, perks and pennies on the dollar. The state government also joined with private foundations to help shore up the city's pension system and keep the valuable collection at the Detroit Institute of Arts off of the auction block. Judge Rhodes said the deal approached the miraculous, but he added Detroit must improve police, fire and emergency medical service he called intolerable. Mayor Duggan says the city has already privatized garbage service, put up new streetlights and torn down increasing numbers of blighted buildings.
DUGGAN: We have been implementing the elements of the plan of adjustment for the last five or six months so people are going to get up on Monday and they're going to see the same thing. I'm very proud to say this past week we had the fastest EMS response time we've had in this city in five years. It was under 12 minutes for the first time.
KLINEFELTER: But a court-appointed independent analyst says Detroit remains very much a city on the edge, with high unemployment and poverty rates. Analyst Martha Kopacz says the sheer speed of the bankruptcy and the number of deals reached with creditors leaves Detroit with almost no margin for mistakes.
MARTHA KOPACZ: Because the settlements involved providing creditors with assets, cash; the financial flexibility of the city continued to dwindle. The settlements cut the economic resources of city to the bone.
KLINEFELTER: Outside the bankruptcy court some retired city workers wonder if any new investment coming to Detroit will stay in the thriving downtown area, or reach their impoverished neighborhoods. Like many other retirees, Yvonne Williams-Jones' monthly pension payments are being cut as part of the plan to exit bankruptcy. She says she's seen few improvements so far that make her sacrifice worth it.
YVONNE WILLIAMS-JONES: The lights are still off. The garbage is not being collected any different than it was when it was city workers collecting it. This is not justice. What happened to Detroit is a direct result of the disinvestment in the city by large corporations and the same people who are supposed to come back and save the city are the people that dismantled the city.
KLINEFELTER: Williams-Jones says she and some other retirees still hope to challenge the bankruptcy plan in courts, but they are hard pressed to find the money to hire attorneys. Most of the creditors who have the means to pursue any litigation have already settled with Detroit and agreed not to pursue any appeals.
For NPR News, I'm Quinn Klinefelter in Detroit.