Detroit bankruptcy timeline of events
Published: April 1, 2014
• The Michigan Supreme Court, in a 5-4 decision, rules that the dispute over font sizes shouldn’t keep the referendum on PA 4 off the ballot. As a result, the law is automatically put on hold until voters have their say in November. In yet another controversial decision, state Attorney General Bill Schuette issues a decision saying that the previous law, PA 72, can be revived. Emergency managers lose their expanded powers as they become emergency financial managers with far more limited authority than they had under PA 4.
• Michigan voters, by a margin of 52 percent to 48 percent, vote to repeal PA 4. Emergency financial managers, already operating under PA 72, remain in place.
• A new law, PA 436, which duplicates much of PA 4, is quickly passed during a lame-duck session of the Legislature. Unlike PA 4, however, the new law contains appropriations that are built into it. Doing so, as suggested earlier in the year by Jones Day attorneys, makes the new law referendum-proof.
• With the state having declared that Detroit was moving too slowly with regard to implementing aspects of the consent agreement, which was intended to be a five-year plan, the city is told to hire Miller Buckfire to assist with restructuring. The no-bid contract is worth $1.8 million. In addition, MB is put in charge of helping the city evaluate law firms it is interviewing to come in and lead restructuring efforts. That, too, is a condition dictated by the state. According to court documents, Miller Buckfire gave Jones Day questions it was going to be asked in advance of an interview with city and state officials at Detroit Metro Airport. Miller Buckfire also suggests that Jones Day not reveal to city officials that the firm helped craft both the consent agreement and PA 436. Finally, Miller Buckfire created the matrix by which law firms would be evaluated. Jones Day came out on top, besting the nearest competition by a single point.
• Following Jones Day’s presentation at the airport, which included Kevyn Orr as part of the firm’s pitch team, Richard Baird, a confidant of Gov. Snyder’s, begins trying to recruit Orr to become Detroit’s emergency manager.
• According to published reports, an audit reveals that Detroit’s accumulated deficit is topping $320 million.
• A review team appointed by Gov. Snyder declares that Detroit is in a state of “operational dysfunction” and has no plan in place to rectify the situation. State Treasurer Dillon says during a press conference that he still believes that the city can avoid having to file for bankruptcy. Gov. Snyder’s spokeswoman says her boss will review the expert panel’s report carefully before making a decision on appointing an emergency manager.
• Mayor Bing flies to Washington, D.C., to meet with Orr and discuss power-sharing arrangements.
• Mayor Bing selects Jones Day to be the law firm that leads Detroit’s restructuring efforts. The firm begins work immediately even though, under the city’s charter, its contract must first be approved by the Detroit City Council.
• Gov. Snyder, on March 14, announces that he has selected bankruptcy specialist Kevyn Orr to be Detroit’s emergency manager. He’s installed on March 25 as an emergency financial manager under PA 72 because the new law doesn’t take effect until three days later. The timing is crucial because PA 436, unlike its predecessor, offers cities and school districts in a financial crisis a menu of four options: emergency management, a consent agreement, mediation or, with the governor’s approval, seeking bankruptcy directly. Here’s the catch: In jurisdictions with an emergency financial manager in place before March 28, when the new law took effect, those options wouldn’t be available.
• Kevyn Orr becomes Detroit’s emergency manager on March 28, when PA 436 takes effect. He’s provided with a suite — estimates put the cost at, at least $2,000 a month. He will testify later that he was unaware that the bill was being footed by Gov. Snyder’s so-called NERD fund — a nonprofit that won’t disclose who is contributing to it.
• The first of two federal lawsuits challenging the constitutionality of PA 436 is filed. Plaintiffs include residents from a number of cities and school districts where emergency managers have been installed. The Sugar Law Center, a nonprofit, takes the lead on the case. A second lawsuit, filed by the Detroit branch of the NAACP, is filed soon afterward.
• At a community meeting held at Wayne State University, Orr, when asked about pensions, responds by assuring retirees that under state law they are “sacrosanct.” Like Snyder, he took an oath to uphold the state constitution. At the same meeting, Orr puts the chances of bankruptcy at 50/50. The bankruptcy judge who is eventually given that case will, six months later, determine that Orr made the statement “knowing in fact there was no chance of that.”
• On June 14, he releases a so-called “Proposal for Creditors” that, later testimony will reveal and Orr will admit, is structured in such a way that it is not possible for pension recipients to know exactly how much they would be receiving if they accepted the deal.
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