Scrap metal, Joe Louis Arena key to Detroit bankruptcy exit plan

DETROIT – The city of Detroit is doing what it can to convince bankruptcy Judge Steven Rhodes its plan is a good one.

As part of that, city attorneys told Rhodes on Tuesday that for all its potential, Joe Louis Arena is not worth much after the Red Wings leave it. In fact, it's not worth anything. That suggestion has left the judge asking questions.

Related: Detroit gives Joe Louis Arena to creditor

The arena is Financial Guaranty Insurance Company's (FGIC) prize in its bankruptcy settlement with the city. "The Joe" is a storied landmark with a development potential that gave FGIC reason to take 13 cents on the dollar for its billion-dollar claim against Detroit.

"It's probably past its useful life, you know -- ceiling tiles, mold, things falling down and then you have to demolish it," said Emergency Manager Kevyn Orr. "There may be -- hopefully not -- but there may be an obligation to remediate any environmental contamination. It probably has a negative value."

Strangely enough, Judge Rhodes heard Tuesday there is more value in the city's decaying lighting department. The Department of Public Lighting is falling apart with lights hanging by a live wire. It's rusting and antiquated, but is slowly getting a makeover.

Related: Fixing Detroit's antiquated power system will take years

City testimony showed there is about 13 million pounds of copper wire -- more than 6,000 tons -- underground and in the air. The city hopes to get between $35 million and $40 million in scrap value.

Related: Detroit considering sale of scrapped copper wire

"You want to recover that, you want to salvage that. But that's also a very dangerous proposition," said Orr. "Some of that wiring is enclosed in contaminated insulation, PCB's and other carcinogens, so you have to be very careful."

Over the next couple of weeks, the city will auction off old busses and police cars. It's the small details like this that Judge Rhodes will have to consider when deciding whether to grant Detroit its exit from this historic Chapter 9 municipal bankruptcy.

"I hope we've demonstrated it's feasible, that it's sustainable and it's the right thing to do," said Orr.

On Wednesday, the judge's own expert, Martha Kopacz, will tell the judge whether she believes what Orr said. Kopacz is a senior managing director at Phoenix Management Services L.L.C., a national turnaround and financial consulting firm. Her team has given advice to public agencies and local governments in New York, Delaware, New Jersey and Pennsylvania.

Read recap: Detroit's bankruptcy trial hearing -- Oct. 21, 2014

Special section: Detroit Bankruptcy


About the Author:

Rod Meloni is an Emmy Award-winning Business Editor on Local 4 News and a Certified Financial Plannerâ„¢ Professional.