DETROIT — Objectors to a Detroit bankruptcy are confusing careful and deliberate planning by state officials with pursuing bankruptcy at all costs, attorneys representing Detroit's state-appointed manager argued Friday.
They "want to punish the governor and treasurer for contingency planning, for doing their jobs," said lawyer Matthew Schneider, the state's chief legal counsel. "This was never about predetermining a Chapter 9 filing. This was only about careful consideration."
Attorneys representing Detroit's state-appointed manager were making their final case on Friday to a federal judge who will determine if the city can fix its finances in bankruptcy. Final arguments are continuing throughout the day from the city, retiree groups, unions and pension funds.
The city in July became the largest municipality in the U.S to file for Chapter 9 protection, but Judge Steven Rhodes gets the final say on whether Detroit is eligible for a restructuring overseen by the court. Critics claim emergency manager Kevyn Orr wanted bankruptcy for months and didn't want to try good-faith negotiations before filing.
But Schneider told Rhodes that the bankruptcy filing was always a "last resort" and contingency planning doesn't "mean you want the storm to come."
Rhodes said he found it "factually impossible" for attorneys representing Orr to conclude that negotiation with creditors was "impracticable" while arguing they negotiated in good faith with them.
Attorney Bruce Bennett said he disagreed, and noted that it's widely understood that reaching an out-of-court settlement is a "great thing" but "extremely difficult." He said a proposal for creditors released in June and subsequent meetings with them laid out in great detail the city's financial problems — which nobody disputed — and prescriptions for solving them, but no group came forward with a credible counterproposal.
"Nobody was hiding the ball," he said. "Everyone understood that negotiations were likely to fail."
Sharon Levine, an attorney representing the American Federation of State, County and Municipal Employees, is expected to lead off closing arguments for lawyers representing bankruptcy on Friday afternoon. She previously argued that talks between Detroit and its unions should have lasted months, not weeks, and the city spent months plotting a path to Chapter 9 instead of seeking compromise that could keep it out of bankruptcy.
Orr, a bankruptcy expert who was appointed emergency manager last March by Michigan Gov. Rick Snyder, has said Detroit has at least $18 billion in long-term debt, including $3.5 billion in pension shortfalls.
If Detroit is found eligible to stay in bankruptcy, the case would turn to how to solve the debt. The city has said it could propose a plan by the end of the year. Meanwhile, a team of mediators has been meeting with all sides in the hope of reaching an out-of-court compromise.
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