Detroit's Bankruptcy Battle Begins

The battle over Detroit's bankruptcy plan gets underway as the city looks to resolve its more than $7 billion in debt.
5:16 | 09/02/14

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Transcript for Detroit's Bankruptcy Battle Begins
-- It is Tuesday September 2 summer over unfortunately -- -- there French market thorough today's today's big -- seven billion dollars that. Is how much debt the city of Detroit is looking to shed as it is closely watching. Bankruptcy case. Is being. Beginning today in federal court. Everyone down Cutler in New -- -- -- -- they -- from Yahoo! finance Rick good Tuesday morning to you again show gives the basic details what's happening in this case. -- -- on for more than a year Detroit filed for chapter nine bankruptcy back in the summer of 2013 to finally. They've hammered out what they think is up plan and they're going to court that there are few -- that who don't -- to the plan. That's what this trial is about. They did the judge in this case is going to decide is this plan he's gonna sort of give -- an up or down all or nothing approval price take about six weeks or so. And if if the plan goes through that will allow Detroit to kind of start over by the end of 2014. So this this whole plan of adjustment as the 400 page document that's of those judges going to be reviewing over. What has sort of been the main crux the most significant part of this whole plan the -- It has actually negotiated agreements with. Most people who have a stake in this and that is thousands and thousands of retirees who have pensions. That need to be paid by the city of Detroit -- it has to be funded by AI you know today's tax dollars. And they got the pensioners to agree to cuts they got a lot of city. City employees. Firefighters and police officers for instance to agreed to a few cuts and the -- the holdouts here are basically a couple of bond insurance firms. That are saying you know what those pensioners. And city employees are getting -- way better than we are. And we think that's not fair so. I mean as in any bankruptcy case. You know everybody's fighting over everybody need to take some kind of -- -- -- everybody's fighting over who's gonna suffer the most and it's these -- these a couple of bond insurers that are saying. You know this agreement that's been negotiated is not fair to us and we want a better deal. So what does -- acidic and the broader context Detroit is not the only city that space these kinds of difficult decisions. Isn't a ticking time bomb where else in the country. You know that's a great question and you know a few years ago Paris some real concern that there could be other big cities facing problems like this. Up till now mostly -- and it's been small municipalities. Smaller towns. That have a very limited tax base for instance. There are some big and it is that are in trouble the state of Illinois is one. But you know the one thing that most. States or cities or even towns can do to get out of a search of a problem like this is raise taxes I mean -- can always raise taxes. And that's why. People who invest in municipal bonds think there are very safe investment. We've got to -- -- improving economy right now it seems like most of the cities that seemed like they might have a problem like this. Are getting by an -- at and it's unlikely we're gonna see any other big bankruptcy. Cases such as Detroit's. It could still happen on a smaller level and if the economy -- were turned south again and tax revenues were to drop. We might see some cities that are actually facing this but for now I think we dodged the bullet in those cases. Rick let me ask -- -- going back to the case in Detroit that. I -- -- hearing a few stories back and forth about the art collection held by the Detroit institute of art how would that be impacted or are somehow being affected. By this grand plan. Well that's that's a city asset like any asset and in -- in bankruptcy. You know one of the things you do as you sell assets to raise funds because you have legal obligations you have made contracts to -- people in the future if he can't pay them yet to find a way to do it. So what this deal does and again. This is through a lot of maneuvering by the emergency manager in this case. You'll actually protected the assets in the art institute it will sort of put them in a nonprofit -- where they cannot be sold. And again you've got these couple of bond insurers are sort of saying -- that would be a real shame if you had to Sally are but you made a deal to pay us. And you know contract -- -- contract so that's part of what the the judge will be considering in this case. -- one of the things things about the art the art that Detroit downs. They will not get top dollar for that artists to have distinct sort of a fire -- -- -- that's that's part of the reason so it might be valued. At several billion dollars but if you sold it off piece by piece decry what effect it's full value in the first place so that's one of the reasons. They want to protect it at plus the fact that it's just a wonderful collection for the city of Trenton like keep it. -- and lastly that there is no jury obviously distraught because the federal bankruptcy case how long is this case expected to go on. -- about six weeks it's just complicated they got to work through a lot of testimony. By the end of October I think will probably know the outcome here the waves have been repayment for got to find its on this Tuesday morning Rick thank you so much appreciate it. Sure -- -- of course you can keep up with latest headlines right here on People like that it number. I'm debt that's where New York.

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