Inside Detroit’s Bankruptcy Case
The Equity Factor

Inside Detroit’s Bankruptcy Case

We talked with Detroit News reporter Chad Livengood about covering the Motor City’s bankruptcy trial.

A view of the Renaissance Center from Brush Park. Credit: Bill Bradley

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When Detroit filed for bankruptcy in July, national reporters descended on the Motor City to give their impressions of a place staring down Chapter 9 and get a few shots of Michigan Central Station for their reel. Then they skipped town. All that was left were the local dailies, some wire reporters and a handful of the few remaining one-person bureaus for big national papers.

Robert Snell and Chad Livengood at the Detroit News have been filing articles at all hours of the day — Livengood received an email from Snell at 4:21am the day I talked with him — in what has basically become a crash course in municipal bankruptcy. I called Livengood to chat about the media’s misconception of the story, when the new mayor might get control of his city and when to expect a ruling on bankruptcy.

Next City: It takes a certain amount of nuance to write about Detroit. What’s the one thing you see mischaracterized most?

Chad Livengood: The common thing I hear, in the conservative media at least, is that the city was run by Democrats who just ran the city into the ground. It’s such a simple and generally unfair way of summarizing Detroit’s downfall. That’s one of the biggest misconceptions, when people try to fit what happened to Detroit in a small box. It’s a very complex societal, financial and economic unraveling of a once-powerful and mighty city.

NC: It’s been a bit of a carnival there. No shortage of excitement for the reporters on the beat?

Livengood: It is a remarkable and arguably very historic event. We had the governor of Michigan come in and testify under oath. And the emergency manager, Kevyn Orr, sat for four days for testimony. There’s a lot of moving parts and players involved. Everyone from the titans of Wall Street to the $20,000-a-year pensioner fighting for their piece of Detroit.

NC: It seems like there were countless witnesses and creditors who took the stand. Is that just me?

Livengood: They’re trying to let everybody get their day in court. It’s been very fair and evenhanded. Some observers say that’s largely because Judge Steven Rhodes knows this case is going to be appealed all the way to the top, and he wants to make sure that every stone was unturned, basically. And I can attest, having sat through many hours of testimony, they have turned over a lot of stones.

NC: San Bernardino was ruled eligible for bankruptcy almost a year after it declared. The timetable here in Detroit has been quite quick. When do you expect Rhodes to rule?

Livengood: The judge has signaled that he’s not going to rule until late this week at the earliest. Because he’s given them until Wednesday, the 13th, to file additional legal briefs about whether he should consider the good faith negotiation standards for labor law or bankruptcy law.

NC: How much longer will Kevyn Orr be in place? Will he stay on past his appointment?

Livengood: The voters of Detroit elected a new mayor, Mike Duggan, last week. When Orr was appointed in March of this year, the emergency manager law says that after 18 months he can be removed by a two-thirds vote of the city council and the consent of the mayor. Duggan made it clear — this was a campaign issue — that he was going to work to get rid of Kevyn Orr, or at least work to restore some of the mayor’s powers.

NC: As a new mayor in a new era coming out of bankruptcy, I’m sure Duggan wants to put his mark on the city. It’s hard to do that with an emergency manager at the helm.

Livengood: Yeah. Kevyn Orr has put [current] Mayor Dave Bing on the sidelines and relegated him to a lot of ribbon cutting ceremonies. He’s taken away a bunch of his staff, including some of his appointees. Duggan has also made the case that he, as mayor, should be put in charge of running operations for the city — that Orr is a bankruptcy and corporate financing specialist and he should just stick to that. Evidence of Orr’s lack of experience in municipal government has shown at times.

NC: Many experts and writers just assume the city will be declared eligible for bankruptcy. Is that the impression you get? How soon should we expect it?

Livengood: They filed for bankruptcy on July 17. It hasn’t even been four months and we’re already at the end of the trial. It took San Bernardino a year to even get a trial. There’s no doubt this case is moving along at lightning speed. But most people who have followed the trial, and legal experts looking at the facts, pretty much conclude that Judge Rhodes is going to declare the city eligible for bankruptcy.

Orr has said they want to file a plan of adjustment before the end of the year. So we’re going to be going into the holiday season and they are preparing to go full bore. Everyone working behind the scenes is moving forward presuming that the judge is going greenlight it before the end of the year.

The Equity Factor is made possible with the support of the Surdna Foundation.

Bill Bradley is a writer and reporter living in Brooklyn. His work has appeared in Deadspin, GQ, and Vanity Fair, among others.

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Tags: detroitequity factorbankruptcymike duggan

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