02.27.14

No Delay on the Final Laps: The Motor City’s Timetable:

  • Creditors will have a deadline of April 1st to file objections to the city’s plan of adjustment—and that date will mark the date upon which depositions on objections may begin—with the Judge determining the challenges would bisected into legal and factual objections—with a separate trial for each category.
  • Judge Rhodes set a deadline of April 4th for the Motor City to respond to all objections,
  • April 14th for both a status hearing and to entertain objections to the disclosure statement, and
  • April 28th to hear legal objections to the plan of adjustment (which could include a battle over whether Detroit can legally be forced to sell Detroit Institute of Arts property).
  • June 11 for a final pre-trial conference for June 11th;
  • June 16 for a trial date on the factual objections to the city’s plan, and
  • Then set aside nine additional days throughout June for the trial if necessary.

State of the Motor City. Mayor Mike Duggan yesterday vowed that “change in Detroit is real” to fix broken city services, in beginning to spell out the specifics of his plan to spend $20 million to demolish fire-damaged abandoned structures in his first State of the City address. Telling the audience of a changed and improved relationship with the City Council and the launching of a new Department of Neighborhoods, as well as revised Public Lighting and Detroit Land Bank authorities, he said: “You’ve seen us take on these issues calmly and deal with them honestly…The change has started, and the change in Detroit is real.” In his speech, Mayor Duggan emphasized that fighting blight is a top priority, vowing to tap an unused fire escrow account to raze about 5,000 properties. Noting that the cost the insurance companies pay frequently falls short of the cost of demolition, the Mayor promised to use the funds to “start rolling through the community and start to bring those blocks back.” The $20 million fund will be in addition to the $520 million Detroit Emergency Manager Kevyn Orr has proposed as part of the disclosure document he filed with the federal bankruptcy court last week. Mayor Duggan noted he has launched his Department of Neighborhoods, as well as hired new staff to set up an office in each of the seven City Council districts, so they can work with neighborhood groups to fight abandoned and deteriorating structures—especially now that a task force, including Quicken Loans Corp. Chairman Dan Gilbert, has finished a parcel-by-parcel survey of blighted and abandoned structures in the city.  Mayor Duggan noted that a key component of the anti-blight initiative will include taking on the scrappers “who are tearing this city apart” by stripping precious metals, air conditioners, and other fixtures from homes and businesses, and selling them as scrap metal—including working with the Governor and members of the Michigan Legislature to pass stalled legislation that would put more restrictions on the sale of certain items in scrap yards―including taking a clear photo of the seller of certain items to discourage the stripping of properties, as well as a three-day waiting period on the sale of copper wire, catalytic converters, and air-conditioning condensers in scrap yards so police investigators have time to track the items. Mayor Duggan told the audience he has assembled a team to help the city develop its own auto insurance plan, a plan he terms “D-Insurance,” stating he is working with the City Council to conduct a feasibility study that should be finished by summer.

Less Harried in Harrisburg.  Pennsylvania Gov. Tom Corbett yesterday celebrated Harrisburg’s court-approved exit this week from receivership, noting: “After decades of financial difficulties and nearly three years of fiscal emergency, we pulled everyone together to develop consensual solutions and provide a path to fiscal recovery for the people of Harrisburg…By working together, we overcame extraordinary challenges to create a sound plan for Harrisburg that did not include bankruptcy or bailouts.” The Governor commended Harrisburg Receiver Gen. Lynch for his distinguished service in a ceremony at the state capitol to commemorate the official end of the city’s fiscal emergency: “He came in and did what did what generals do – he took command, and he did it by bringing everyone together.” General Lynch is scheduled to leave office effective this Saturday, when the city will transition to Pa.’s Act 47 program under the administration of Fred Reddig—marking a successful conclusion to Pennsylvania’s first and only receivership. Gov. Corbett also had kind praise for former Mayor Linda Thompson, the city’s first black and first female mayor—who told the audience that the event marked an opportunity for the city to move forward without being saddled with about $600 million of debt. General Lynch urged state and local officials to “be kind to one another” as they move forward implementing the plan. Mr. Reddig noted: “The focus is now primarily on operational issues and assisting the [current Mayor] Papenfuse administration in building capacity within the administration,” at yesterday’s meeting of the Municipal Financial Recovery Advisory Committee, which preceded Corbett’s conference. The ceremony yesterday came one day after Council voted 6-1 to authorize spending up to $4 million of tax revenue anticipation notes, in what would mark the city’s return to the capital markets. On March 15, the city will make its first general obligation bond payment — for $4.7 million — since September 2011. Harrisburg has missed four straight biannual GO payments. Harrisburg’s emergency from fiscal distress marks an exceptional timeframe, albeit leaving a hard fiscal road ahead. Governor Corbett declared the city in a state of fiscal emergency in September of 2011. In October, the City filed for Chapter 9 municipal bankruptcy protection, but the following month, Judge Mary France of the U.S. Bankruptcy Court for the Middle District of Pennsylvania in Harrisburg dismissed the filing, saying it contradicted a state ban on Harrisburg’s filing and needed the consent of then-Mayor Linda Thompson, who had refused to agree. Nevertheless, Professor David Fiorenza of Villanova yesterday warned of challenges ahead: “It is time to now work on their branding, like other Pennsylvania cities have so well in the past 10 years…The number of nonprofits and tax-exempt properties will continue to be the ghost in this town that will not leave. That is one area that will continue to hold Harrisburg back with growing its tax base.” General Lynch is scheduled to speak at a municipal distress panel April 14 at Widener Law in Harrisburg as part of a symposium, “Bankruptcy and Beyond” in which our Sustainability Project will be participating.

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