Detroit bankruptcy timeline of events
Published: April 1, 2014
• Venture capitalist Rick Snyder, the self-described “one tough nerd” who campaigned on the theme of being a moderate, is sworn in as governor. Holding his right hand up, with palm out, and with his left hand on a family Bible, Snyder swore to “support” both the U.S. Constitution and the state constitution. The latter document contains a mandate stating, “The accrued financial benefits of each pension plan and retirement system of the state and its political subdivisions shall not be diminished or impaired thereby.”
• Public Act 4 is enacted. The controversial law greatly expands the powers of state appointees assigned to take control of school districts and municipalities in financial crisis. When the law is passed, the state Legislature holds a vote to have it immediately implemented. More than two years later, the U.S. Court of Appeals for the Sixth Circuit would call the immediate-implementation vote a “farce.”
• Opponents of PA 4 — which gives appointed emergency managers unprecedented power over cities and school districts — begin circulating petitions and gathering signatures in an attempt to have voters decide the law’s fate in a referendum.
• Two lawyers from the Jones Day law firm publish a paper titled “Pensions and Chapter 9: Can Municipalities Use Bankruptcy to Solve Their Pension Woes?” In the article, they say there’s little to no precedent for using municipal bankruptcy to avoid paying the pensions promised workers, put that there is reason to believe that doing so is legally possible.
• Detroit Mayor Dave Bing warns that Detroit is quickly running out of money and time, saying that the budget deficit could reach $150 million by June, when the city’s fiscal year ends. The mayor suggests that an emergency manager may be necessary. Some say the mayor is using scare tactics in order to wring concessions from labor unions. He would later say under oath in a deposition that he believed the city could have found its way through the crisis without either an emergency manager or filing for bankruptcy.
• Gov. Snyder contends that the appointment of an emergency manager for Detroit is anything but imminent. “I’m not aspiring in life to run the city of Detroit,” Gov. Snyder says in an interview. “My goal is to be a supporting resource and be there to help Detroit succeed by itself.”
• Democrat Andy Dillon, a former venture capitalist and state legislator appointed state treasurer by Republican Gov. Snyder, recommends the state send in a team of specialists to review the city’s finances. (Earlier in the year, Miller Buckfire had been given a $150,000, two-month contract to conduct a review of the city’s finances.)
• In what the Huffington Post described as a “the result of a massive statewide grassroots organizing campaign led by a coalition of groups called Stand Up for Democracy” the total number of signatures gathered over the past year reaches more than 226,000 — about 60,000 more than are needed to put a referendum on PA 4 on the ballot. Once the signatures have been verified and the referendum is officially placed on the ballot, PA 4 will be suspended until the voters have their say in November.
• A consent agreement the city is being pressured to sign in order to avoid having an emergency manager appointed is in the process of being drafted. Also, the potential for PA 4 being repealed by voters generates concern in the Snyder administration. The Jones Day law firm is enlisted to help deal with both issues; the firm’s services are provided free of charge. Lawyers for the Retired Detroit Police Members Association sum up Jones Day’s involvement in the issues as follows:
“In early March 2012, attorneys from the firm of Jones Day, along with representatives of Miller Buckfire [an investment banker with extensive bankruptcy experience], were involved in discussions with the Michigan Department of Treasury regarding the consent agreement the State was seeking to compel the City of Detroit to agree to under the provisions of PA 4. On March 2, 2012, attorneys from Jones Day determined that the “cleanest way for the State to take control of the City of Detroit was to pass new legislation that included a spending provision which would insulate such legislation from repeal by the referendum process.”
• Faced with the threat of an emergency manager being imposed, a majority on the Detroit City Council vote to accept a consent agreement with the state. Mayor Dave Bing signs off on the deal as well. “The deal, which creates an advisory board to oversee financial decisions, spared the city from fates that many viewed as far worse: a complete takeover by a state-appointed manager, bankruptcy or default,” reports the New York Times.
• Citizens for Fiscal Responsibility (CFR), a group created by conservative business interests, challenges the signed petitions submitted by Stand Up for Democracy. Among other things, CFR contends that the heading on the petitions aren’t in 14-point boldfaced type, as required by law.
• Michigan’s Board of State Canvassers votes 2-2 on the question of allowing the referendum on PA 4 to be placed on the November ballot. The split vote — which falls along party lines with Democrats in favor and Republicans opposed — means the measure remains off the ballot. As a result, emergency managers remain on the job in a number of cities and school districts. Opponents of PA 4, a group that includes union members and civil rights activists, erupt in anger at the decision.
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