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Judge approves Detroit's bankruptcy plan

Judge Steven Rhodes found city's plan fair, feasible

A judge on Friday approved Detroit's plan to get out of bankruptcy, ending the largest public filing in U.S. history and launching the city into a turnaround that will require discipline after years of corruption, budget-busting debt and an exodus of residents.

Judge Steven Rhodes announced his decision from the bench.

Recap: Rod Meloni's notes from bankruptcy court

"The court confirms the plan," Rhodes said within seconds of entering court. He urged the audience to be prepared for a long explanation.

Detroit is cutting the pensions of general retirees by 4.5 percent, erasing $7 billion of debt and promising to spend $1.7 billion to demolish scores of dead buildings, improve public safety and upgrade basic services, among other key steps.

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The case concluded in just under 16 months, lightning speed by bankruptcy standards. The success was largely due to a series of deals between Detroit and major creditors, especially retirees who agreed to accept smaller pension checks after the judge said they had no protection under the Michigan Constitution.

Special section: Detroit's Bankruptcy

No significant critics were left by early October. Bond insurers with more than $1 billion at stake repeatedly argued for the sale of valuable art but dropped that plea and settled for much less.

It took more than two years for a smaller city, Stockton, California, to get out of bankruptcy. San Bernardino, a California city even smaller than Stockton, still is operating under Chapter 9 protection more than two years after filing.

View: Judge Rhodes' oral opinion

Rhodes had to accept Detroit's remedy or reject it in full, not pick pieces. His appointed expert, Martha "Marti" Kopacz of Boston, said it was "skinny" but "feasible," and she linked any future success to the skills of Mayor Mike Duggan and the city council and a badly needed overhaul of technology at city hall.

Watch: Judge Rhodes approves bankruptcy plan

The most unusual feature of the plan is an $816 million pot of money funded by the state, foundations, philanthropists and The Detroit Institute of Arts. The money will patch holes in Detroit's pension funds, prevent even deeper cuts to retirees and avert the sale of city-owned art at the world-class museum.

Michigan Gov. Rick Snyder appointed Kevyn Orr as emergency manager in March 2013, giving him extraordinary authority to fix the city's finances.

With more square miles than Manhattan, Boston and San Francisco combined, Detroit didn't have enough tax revenue to reliably cover pensions, retiree health insurance and buckets of debt sold to keep the budget afloat.

The city has a population of 688,000, down nearly 30 percent from 2000 and an even longer descent from 1.2 million in 1980.

Duggan, in office less than a year, is the fourth mayor since 2008 when Kwame Kilpatrick resigned in scandal. A dreadful debt deal under Kilpatrick that locked Detroit into a high interest rate when rates were falling during the recession contributed to the bankruptcy.

Governor Snyder: Detroit's bankruptcy resolution is the result of cooperation, compromise and a shared vision

Newly re-elected Gov. Rick Snyder released this statement after Rhodes announced his decision:

"People will long remember that when Detroit arrived at this troubling hour, its residents and leaders – with supporters statewide – started to pull together as one. Our state has rallied around its largest and iconic city. It is no longer Detroit vs. Michigan, but the embracing of Detroit, Michigan. This day marks the end of the nation's largest municipal bankruptcy, resolved quickly and successfully as a result of cooperation, compromise and a shared vision from many parties. And it offers hope to hundreds of thousands of residents who call Detroit home. This difficult process inspired an unprecedented ‘Grand Bargain,' where our philanthropic and business communities joined with lawmakers from both parties to lessen the impact on pensions and extend vital services. And we deeply appreciate the sacrifices from retirees who have agreed to take less to help their fellow Detroiters and Michiganders. Much work remains, but we are resolved to continue moving forward collaboratively. Our goal is to restore the vitality of this great city from downtown through the neighborhoods, with the quality of life that Detroit's families deserve. We won't settle for anything less. Detroit's journey is far from over. But there is no mistaking that Michigan's largest city is stronger. Its brightest days are to come."

Attorney General Bill Schuette:

"Today we secured a brighter future for Detroit's tomorrows and for Michigan's tomorrows. Throughout the bankruptcy, we defended the pensions of cops and firefighters who laid their lives on the line for us, protected DIA art for the People of Michigan, and upheld the Michigan Constitution. Detroit and Michigan are stronger and safer."

Dan Gilbert on Detroit leaving bankrutcy:

"Today marks a monumental day in Detroit's history. Now that the slate is clean, it is time for all of Detroit to get back to business. We must continue building the kind of environment that allows jobs and wealth to be created. At the end of the day, the only thing that will enable the city to be fiscally responsible and experience significant growth is to develop a positive climate that encourages innovation at all levels. I am certain Detroit and Detroiters will bring their best game and show the rest of the world what we are capable of achieving. There is no doubt that if we work together and open ourselves up to the creative ideas and exciting opportunities all around us, Detroit will inspire people from within and beyond its borders to transform our city into one of the biggest success stories of the 21st century."