Local 4's Rod Meloni is blogging from inside Detroit's bankruptcy eligibility trial as closing arguments get underway Friday.

A judge will decide whether the city is eligible for Chapter 9 municipal bankruptcy. The city can then move forward with reorganizing its $18 billion debt.

9:45 a.m.

Detroit’s Bankruptcy eligibility trial is nearing a close. Today’s in-court activity is closing arguments.

Court promptly started at 9 a.m.

Taking first turn in the closing arguments was the state of Michigan. It’s attorney was Matthew Schneider. He declared, “This city is eligible for bankruptcy.”

Schneider made no bones about where he is coming from.
He said in no uncertain terms that the governor and the treasurer and Kevyn Orr worked diligently and did their jobs, to deal with a financial crisis.

“They did their jobs” was his constant mantra.

He said the State of Michigan came in because people were suffering in the city, police were taking an hour to respond to crimes, ambulances were falling apart and also not servicing emergencies. Schneider said the governor’s overriding concern was for the citizens of the city of Detroit.

Schneider went on to say the objector unions and their criticisms of the city’s Chapter 9 case make no sense. He likened them to people who ignore the weather forecaster.

He said the objector unions’ cases surrounded the theory that the state and the city had decided chapter 9 was predestined because they were speaking with financial experts early on. He said logically the union position is nonsensical because if you do not listen or consult with the weather forecaster, and you do not put on a rain coat when it starts raining you want the storm to come!

Schneider went on saying you logically would expect planning, cooperation, be ready for anything.

Consultants came to the state volunteering help, the Jones Day Law firm, Huron Consulting, Miller Buckfire, Conway Mackenzie, Ernst and Young were listed among many. He said, “It would be foolish to go it alone and irresponsible not to prepare.”

He said the governor’s testimony was that he prepared for the worst and hoped for the best.

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He further criticized objector unions for wanting to punish the governor and the treasurer and Kevyn Orr for doing their jobs. “This was never about predetermining a Chapter 9.

Even though the objector unions want to say that because there were emails from 2012 from Jones Day and Miller Buckfire that show they discussed bankruptcy early on this case is not about a preordained chapter 9.

He said it was not about Kevyn Orr being hired to execute a bankruptcy, not about an Ingham County judge’s hearing that might prevent a chapter 9 filing, it was about doing the right thing.  

10:30 a.m.

Schneider went on to say this was all about following Public Act 436, the emergency manager law. He said Gov. Rick Snyder “the statutory process was followed to the letter and objectors cannot refute that. Objector unions can’t refute the city is out of cash.”

He pointed out the five main arguments the objector unions have presented in court and refuted them all.

1.) That the purpose of the appropriation put into PA 436 was made to prevent a referendum that would repeal the law down the road. Jones Day attorneys discussed this in early emails as the objector unions did produce, but Schneider said “Jones Day is not the governor and it was not his purpose. The purpose was to pay the emergency managers. Emergency management is not just for Detroit. There were 7 or 8 others in place. It is a statewide problem.” He also said another appropriation to PA 436 was later added to cover consultants for a fiscal year at a much later date. He further explained testimony that showed cities had actually complained they paid for emergency managers and under PA 436 there was a decision that the state did not need to “put it on a city or school district” under emergency management.

2.) It was bad faith to rush to file the Chapter 9 in July. “The facts don’t support that went back all the way. The governor testified he went back all the way to the beginning of his administration, read every file, every report and “conducted this process in good faith. The governor gave chapter 9 careful, thoughtful consideration.”

3.) “Failure to place a contingency [a mechanism to put the state on the hook to pay unfunded pension obligations] was sinister and unconstitutional or both.” “The governor testified we were in a crisis mode, that putting in contingencies would have resulted in more complexities.” Snyder testified he had confidence in the court and while he did not write a contingency into his permission to file for chapter 9 he did include language in it that stated “any plan of adjustment must be a legal plan” as a nod to the constitutional requirement not to alter pension benefits.

4.)There was a scheme to end around the constition to cut pensions. Schneider said this is falsehood. He said the governor and the treasurer explained the city is still $14 to $15 Billion in debt” without the pension benefits included. “It is inconceivable that a Chapter 9 filing is to ‘get the pensions’. The pensions can’t be the target