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“A Loud And Depressingly Familiar Voice”: The Koch Brothers Kick Detroit While It’s Down

Over the last five months, a deal has come together that would solve some of the most contentious issues in Detroit’s bankruptcy. It would minimize the pension cuts for 30,000 retirees and city workers, save the city’s art collection and give a reasonable amount of money to the city’s bondholders.

As expected, there were some objections from a few big insurance companies that stood to lose heavily. But with the support of Michigan’s Republican governor, Rick Snyder, the deal seemed to have a shot in the state legislature, which would be required to spend about $195 million of tobacco-settlement money on behalf of Detroit’s pensioners.

And then, a few days ago, a loud and depressingly familiar voice rose in protest. The Koch brothers, through the screeching megaphone they built known as Americans for Prosperity, condemned the deal and announced plans to contact 90,000 conservatives around the state to build up pressure against it. The Associated Press reported that the group threatened to run ads against any Republicans in the legislature who voted for the deal in the coming days.

AFP has already set up a website — “No more bailouts for Detroit!” — that plays on the long-running, sometimes racially inflected resentment of Detroit around Michigan.

“Michigan has rewritten its laws numerous times to give Detroit special treatment and more financial assistance,” the website says. “Unfortunately, all this help has encouraged, rather than corrected, bad behavior. Years of fiscal mismanagement, corruption and cronyism resulted in Detroit’s staggering $18 billion of debt. Yet its leaders continue to blame the State for Detroit’s problems.”

The poor management of the city by its own officials is well-known and stretches back decades, but the state and its residents bear a huge responsibility for Detroit’s plight. State officials allowed fleeing white residents to hide behind suburban boundaries that depleted the city’s tax base while cutting revenue sharing. The think tank Demos found that revenue sharing cuts amounted to a third of the city’s revenue losses between 2011 and 2013.

As Robert Kleine, a former state treasurer, wrote in the Detroit Free Press last August:

“Detroit may have mismanaged finances, but the state’s cuts to revenue sharing doomed the city. One option would have been for the state to restore revenue sharing to previous levels which would have been worth nearly $200 million to Detroit. The state could have afforded to do this if it had not cut business and income taxes in 2000, and then given business another $1.8-billion tax break in 2011.”

Under the circumstances, the proposed state contribution on behalf of vulnerable pensioners is a modest way to make up for Lansing’s decades of abandonment. But it’s too much for the Kochs to stomach. They apparently want city workers and retirees to publicly suffer for the sin of having been union members. They want bondholders and insurance companies at the front of the creditors’ line, and don’t seem to care if the Detroit Institute of Arts has to sell off its paintings and sculptures to put them there.

As they have in so many other areas of public life, two of the country’s wealthiest citizens are using their good fortune to make life far more difficult for those at the bottom of the ladder.

 

By: David Firestone, Editor’s Blog, The New York Times, May 21, 2014

May 22, 2014 Posted by | Detroit, Koch Brothers | , , , , , , | 5 Comments

“Usurping The Will Of The People”: The Dirty Tricks That Rushed Detroit Into Bankruptcy

Governor Rick Snyder (R-MI) was so desperate to make Detroit the largest American city to declare bankruptcy that his lawyers apparently used deception to make sure their filing was in before a judge could block it.

Ronald King, an attorney for Detroit’s General Retirement System and the Detroit Police and Fire Retirement System, said that he agreed to delay a hearing on an injunction that would have prevented the city from filing for bankruptcy for five minutes at the request of Snyder’s lawyers. In that five minutes, attorneys filed papers to put Detroit under bankruptcy protection, placing all legal action against the city in a temporary stay.

“It was my intention to grant your request,” Ingham County Judge Rosemarie Aquilina told the pensioners’ attorneys.

“There’s no denying this was a race to the courthouse this afternoon and yet another example of usurping the will of the people,” King said.

Pensions are protected under Michigan’s constitution, but this protection has not been tested in federal court. The city has about $18 billion in debt.

The Michigan Republican Party’s eager embrace of emergency manager powers has left about half of the state’s African-Americans without elected local representatives.

When voters repealed the emergency manager law in 2012 by 53 to 47 percent, the state’s Republican-dominated legislature quickly restored it, including a provision that made it impossible for votes to repeal the law again.

Part of the argument for these laws, which allow state officials to replace all elected city officials in municipalities deemed to be in “emergency” with an unelected bureaucrat, was that this process would prevent bankruptcy, which would be too disruptive.

When Snyder selected bankruptcy expert Kevin Orr to be Detroit’s emergency manager, however, it became clear what path the governor, who faces re-election in 2014, had in mind for the Motor City. Orr  – who has already hinted at his intention to cut pensions – will manage the bankruptcy, carrying out the governor’s wishes.

Unions who have seen Snyder and a lame-duck legislature rush in a law designed to weaken unions along with tax increases on pensioners are not hopeful about  the bankruptcy process.

“Every step of the way, the citizens of Detroit were told that they had to give up their right to democratic representation in order to avoid bankruptcy,” Metro Detroit AFL-CIO president Chris Michalakis and Michigan State AFL-CIO president Karla Swift said in a joint statement. “Now that this filing has come anyway, it is clear that either state control has failed or that Governor Snyder and his emergency manager appointee were not honest about their intentions in the first place.”

As the city’s debts are discharged, the question is who will be asked to pay: workers — who were promised a retirement and have already offered concessions — or investors — who knew they were taking a risk?

UPDATE: Judge Rosemarie Aquilina has ruled the Detroit bankruptcy filing violates Michigan’s state Constitution and must be withdrawn, noting that the there had been a “rush” to bankruptcy.

 

By: Jason Sattler, The National Memo, July 19, 2013

July 22, 2013 Posted by | Bankruptcy, Detroit | , , , , , , , | 1 Comment

   

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