Covering Detroit’s bankruptcy

by
Detroit

As Detroit became the largest city to seek bankruptcy protection (in terms of debt), reaction seemed largely to depend on one’s stake in the plan, eliciting varied coverage from the major media outlets.

The New York Times chose to lead with creditors and their anger at being asked to accept pennies for the dollars they invested in the blighted city.

A day after Detroit became the largest American city ever to seek bankruptcy protection in court, the size of the battle this city now faces was growing clear, as creditors vehemently objected to the way Detroit is asking to repay them pennies on the dollar and as representatives of city workers, who face benefits cuts, said the city had failed to truly negotiate before heading to court.

The fiscal realities confronting Detroit have been ignored for too long,” Gov. Rick Snyder said on Thursday as he authorized Detroit’s bankruptcy filing after a recommendation from Kevyn D. Orr, the emergency financial manager Mr. Snyder, a Republican, had appointed to resolve the city’s dire financial situation. “I’m making this tough decision so the people of Detroit will have the basic services they deserve and so we can start to put Detroit on a solid financial footing that will allow it to grow and prosper in the future.”

By Friday, many in this city, including some elected leaders, said bankruptcy seemed unfortunate but also inevitable. But those representing tens of thousands of city employees and retirees said they intended to fight the case, particularly for the thousands of retirees who depend on city pensions.

The Wall Street Journal lead was more nuanced, saying many had mixed emotions and choosing to talk first about those feeling slightly optimistic about the pending battle:

Some residents and businesses responded with a dose of optimism in the wake of the city’s bankruptcy filing on Thursday.

Just a few steps away from the city hall room where Detroit emergency manager Kevyn Orr was outlining the Chapter 9 filing, Roy Ferguson, 64 years old, a pastor from a church in nearby Dearborn Heights, said he wasn’t too concerned about the city going bankrupt.

“This is not a good thing, but with the desperate situation of Detroit, hopefully this will be a way out,” he said as he worked on a stand that will offer barbecued ribs this weekend. “Hopefully, it will mean a turnaround. We need it.”

Around the Detroit metropolitan region, the city’s decision to file for Chapter 9 bankruptcy also was greeted with concern and sympathy for those who might get hurt as jobs and pensions are cut. But many, including the big Detroit auto makers, expressed the view that bankruptcy could turn out to be a good thing for a city crippled by debt.

“At this point, whatever helps the city, I am for,” said Detroit resident Kori Loewe, 30. “I don’t know the ins and outs of what it is going to mean for us as residents, but the city needs help.”

Mariam Noland, president of the Community Foundation of Southeast Michigan, a nonprofit that funds neighborhood development projects in Detroit, said the city’s bankruptcy filing is a “serious moment” for the region. “It will impact the lives of many people. We’re going to see what it means in the real lives of real people.”

But it could prove a turning point, she said. “This is a moment where maybe Detroit can start to move forward,” she said.

Mr. Orr, with Mayor Dave Bing at his side, stressed Thursday that despite the filing, the city would keep issuing paychecks and paying its bills.

Bloomberg took a straightforward approach to their story, talking about the bankruptcy and then adding the context of other municipal bankruptcy filings:

Michigan’s largest city joins Jefferson County, Alabama, and the California cities of San Bernardino and Stockton in bankruptcy. The filing shattered the presumption of many bondholders that local governments, eager to continue borrowing at reasonable rates, would do whatever it took, including raise taxes, to come up with the money to meet bond obligations. Kevyn Orr, the city’s emergency manager, said the debt is $18 billion.

While under court protection, Detroit can stop paying some debts, is temporarily immune from most lawsuits and may be able to ask a judge to cancel contracts, including union agreements. Under Chapter 9 of the U.S. Bankruptcy Code, the first step is likely to be a court fight over whether the city was entitled to bankruptcy protection, a challenge that would ask if the city was truly insolvent and it had no alternative to filing.

Detroit’s filing “is going to affect a number of local governments around the country,” said Keith W. Mason, a bankruptcy attorney with McKenna Long & Aldridge LLP. “It calls for greater early intervention.”

Detroit’s problems and its decline have been well chronicled for the last several years. But it’s interesting to see the varied takes the national business press used in covering the bankruptcy filing. Many people are emotionally invested in the city and its history, yet stopping the bleeding from the housing crisis seems nearly impossible as more people flee.

Here’s hoping that getting the city’s books in order will help put it on the path to recovery and it can regain some of its iconic stature. One thing’s for sure, I can’t wait to read the profiles and interviews with Kevyn Orr once his job is over. Maybe he’ll write a book. I’d read it.