Mich. judge calls Detroit bankruptcy unconstitutional; AG to appeal

Ron Recinto
Yahoo News
Detroit city workers and supporters protest outside the federal courthouse in Detroit while awaiting the bankruptcy decision, Tuesday, Dec. 3, 2013. A judge is expected to announce Tuesday if the city is to become the biggest city in U.S. history to enter bankruptcy. (AP Photo/Carlos Osorio)
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Detroit city workers and supporters protest outside the federal courthouse in Detroit while awaiting the bankruptcy decision, Tuesday, Dec. 3, 2013. A judge is expected to announce Tuesday if the city is to become the biggest city in U.S. history to enter bankruptcy. (AP Photo/Carlos Osorio)

DETROIT It took less than 24 hours for the legal wrangling to start around the Detroit bankruptcy filing.

First a county judge ruled the filing unconstitutional under Michigan law.

Then the state's attorney general said he would appeal the ruling and asked that the judge's orders be stayed until the appeal.

Ingham County Circuit Court Judge Rosemarie Aquilina said the bankruptcy filing violated the state's constitution, which she says prohibits actions that will lessen pension benefits of public employees, including those in Detroit.

She ordered Gov. Rick Snyder to ask Emergency Financial Manager Kevyn Orr to immediately withdraw the bankruptcy filing and that no further Chapter 9 bankruptcies be filed that threaten pension benefits of public employees.

“I have some very serious concerns because there was this rush to bankruptcy court that didn’t have to occur and shouldn’t have occurred,” Aquilina told the Detroit Free Press.

Later in the day Michigan Attorney General Bill Schuette said he will appeal Aquilina’s ruling and ask for a stay so that the bankruptcy can proceed until the appeal is heard.

Aquilina has a Democratic background. Snyder is a Republican.

Earlier in the day, an adamant and focused Snyder said he decided to authorize the largest municipal bankruptcy in U.S. history because “now is our opportunity to stop 60 years of decline” in Detroit.

Snyder cited years of financial mismanagement, deterioration of city services and a decade of having the worst crime rates in the nation as reasons to file for bankruptcy.

“The city is basically broke. It is $18 billion in debt,” Snyder told a packed news conference at Wayne State University in Detroit.

It was the governor's first public appearance since the filing of a 16-page document on Thursday to place Detroit in Chapter 9 federal bankruptcy protection.

The expectation is that the bankruptcy will allow Snyder, Orr and Detroit city leaders to set aside lawsuits and work on gaining financial stability for the beleaguered city by offering protection from creditors and unions.

Snyder said the decision to file for financial protection was a difficult one but one that had to be made.

"It’s been a long period of decline," he said. "It’s time to do something about it."

Orr, who spoke to the media alongside Snyder, blamed years of mismanagement on the city's economic decline.

"The depth of some of the practices ... and the tolerance of this behavior for decades is, at its best, unorthodox," said Orr, who was given 18 months when he took office in March to find a financial fix for the city. "I wish there had been a lot more outrage over the last 10 to 20 years."

Orr was asked if he had discussed Detroit's financial difficulties with the White House, and he declined to comment.

White House press secretary Jay Carney said during a briefing later in the day in Washington, D.C., that senior adviser Valerie Jarrett, National Economic Council Director Gene Sperling and Housing and Urban Development Secretary Shaun Donovan have been in conversations with leaders in Detroit and Michigan.

Carney said he was unaware if President Barack Obama or Vice President Joe Biden have been involved in any of those conversations.

"I would simply say that clearly the situation in Detroit is unique at this time given the declaration and the size of the city and the size of the challenges that Detroit faces," Carney said.
 
Snyder and Orr took questions from local and national media for about 45 minutes behind a simple podium adorned with a photo of the city's iconic skyline and the slogan "Reinventing Detroit."

Several of the questions focused on which of Detroit's prized assets, or city "jewels," including artwork and city parks, would be sold to appease creditors.

"Right now there is nothing for sale, including Howdy Doody," Orr said referring to the TV puppet that is in storage at the Detroit Institute of Arts that some say is worth $1 million.

Synder touted the investment in the city from benefactors such as Quicken Loans chairman and Cleveland Cavaliers owner Dan Gilbert, who has bought up millions of square feet of real estate in the heart of the city and invested about $1 billion to move the city into a technology hub of the Midwest.

He also credited Detroit Tigers and Red Wings owner Mike Ilitch for years of investment in the city and a new commitment to build a new hockey arena downtown.

"There are so many tremendous things going on," Snyder said. "Young people are moving to Detroit."

Both Synder and Orr said the process will involve working with creditors, pension fund managers, civil servants, citizens and government leaders to improve neighborhoods and get the city back on a solid financial foundation.

"People may say this is the lowest point in Detroit's history," Synder said. "This is the day to stabilize Detroit."

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