U.S. Bankruptcy Judge Steven Rhodes is presiding over the fourth day of testimony in the Detroit bankruptcy case.
At issue...
- Is it true that Detroit can no longer pay its bills?
- Did city leaders negotiate with creditors "in good faith" before filing for bankruptcy protection?
Two of the main players in the bankruptcy filing are in court today.
Detroit's state-appointed emergency manager Kevyn Orr took the stand last Friday and again this morning.
In his testimony, Orr said he knew conditions in Detroit were bad (he called the city the "Olympics of restructuring" when we took the position), but the depths to which the city had sunk still surprised him.
From the Detroit News:
“Do you recall your general reaction upon learning about the cash and liabilities and revenue?” the city’s bankruptcy lawyer Greg Shumaker asked during direct examination. “I knew things were bad but it was somewhat shocking how dire it was,” Orr said. “Within a few weeks of coming on board, I was informed several of our employees had checks bounce. The cash flow was so tight.”
Orr testified that it became clear to him that bankruptcy was going to be the only way for an orderly resolution to the city's financial troubles.
Michigan Radio's Sarah Cwiek is at the hearing. She sent these tweets during Orr's testimony:
July 16th: Orr sent Gov, Treasurer letter asking auth to file bk. "I was running out of time."
— Sarah Cwiek (@sarahcwiek) October 28, 2013
Orr re: Chap 9 filing: Given amount of litigation, "there was no other way to get comprehensive and orderly" resolution.
— Sarah Cwiek (@sarahcwiek) October 28, 2013
Lawyers for the unions and pensioners are arguing that bankruptcy was the plan all along, that there was no true exploration of a way around bankruptcy from Orr or from Governor Snyder.
Gov. Snyder takes the stand
In a continuation of the unusual story that is the Detroit bankruptcy, a sitting Governor is now testifying in the country's largest municipal bankruptcy case.
Gov. Snyder signed off on Orr's bankruptcy filing saying it became clear that negotiation with creditors was not going to work. From Gov. Snyder's FAQ on the Detroit bankruptcy filing:
There was no guarantee all the parties would agree. There was strong disagreement about the restructuring plan. Detroit is in a crisis and we’ve got to get going on the solution.
Snyder said that he "worked very dilligently, in good faith, to avoid this [Chapter 9 bankruptcy]."
Pension fund lawyers today questioned why Gov. Snyder did not protect pension funds in the bankruptcy filing. Gov. Snyder testified that he did not want to slow the process down with conditions attached.
From the Detroit News' LiveBlog:
“I made the decision not to put any conditions because my concern was this is an extremely difficult process, we are in a crisis mode and have serious issues here and felt it could be an issue causing more delays,” Snyder said. “I have confidence in the judicial process. “I believe I am following the constitution and the constitution of the United States, which treat pensions as a contractual obligation,” which can be altered in bankruptcy court, Snyder added.
Michigan Radio's Sarah Cwiek will have more for us later today.
