Bankruptcy for Detroit?


Normally, this blogger writes about solely eminent domain issues.

In this case, the issue of a potential Detroit bankruptcy does directly relate to eminent domain. Of greater import, the issue affects not only eminent domain, but also every fiscal issue in the city of Detroit and the state of Michigan.

On the eminent domain level, bankruptcy creates havoc with the preference being given to those property owners who have already lost the property, but have not yet received Just Compensation. By example, let us assume the city has offered $4 million for a marine terminal on the Detroit River. When it files, it deposits the $4 million with the court and takes possession of the marine terminal. What happens in six months, when the case evaluators in mediation or a Judge or jury determines this property is worth $20 million? That unknown contingency is an additional risk and would have priority over all of the other obligations of the city. This bankruptcy would raise havoc with the disposition of funds.

This blogger finds it interesting that accountants, lawyers, and workout practitioners note the bankruptcy may be the best alternative for Detroit. A bankruptcy would only assure full employment for lawyers, accountants, and commercial workout professionals and less police, fire, and needed public employees for the community.

By the way, publicly elected officials would still be on the payroll, still be whining and creating costs, which would not be abrogated.

Has anyone ever heard about bonds? Bonds are paid with city receipts. Bonds might be convertible to judgments and would have lien priority in the future, fully contemplating 100 percent payment, with interest, somewhere down the line. This would include the next time the assessor places the tax obligations on the assessment role.

As for the bonds, has anyone thought about who the guarantor of these bonds would be? Has the state not guaranteed some, if not most, of the bonds the city has entered into? The answer is “yes.”

How about the Water and Sewer Department bonds? Now that Oakland County, Macomb County, and Wayne County have a role in the process — instead of receiving the “profit” from the Detroit Water and Sewer Department — they may find themselves holding a bag of additional debt when the finances of the Water Department and the City of Detroit are consolidated.

Ho, ho, ho. Bankruptcy would not be a Christmas gift for Detroit.

May it be suggested that the Mayor and the City Council think about where we are going? It is not time to punish the bearer of the bad news, being the Governor, for facing a realistic problem that exists despite us placing our heads in the proverbial sand.