Three Signs Of The Havoc The Bankruptcy Process Is Wreaking On Detroit


detroitSince Detroit declared bankruptcy in July, the legal process has been rapid. Judge Stephen Rhodes recently moved up the start date of the hearing to determine the city’s eligibility for bankruptcy from late October to September 18, which means it will have taken just 90 days to go from the initial filing to the crucial eligibility hearing.

Here are three of the strangest stories indicating the dysfunction in the city during this three-month sprint to bankruptcy:

1. Detroit stopped issuing death certificates because it couldn’t get the proper kind of embossed paper. Five days after filing for bankruptcy protection, Detroit apparently ran out of the specialized paper on which official death certificates are printed. The vendor who provides the specialized paper demanded cash instead of credit to resupply the records office, and the city didn’t have any. Funeral home directors in the city got a text message from their colleague on July 23 announcing the city couldn’t issue death certificates. The paperwork is crucial to various legal processes that follow a death, and the inability to provide the official documents to family members would have delayed or prevented many of the official transitions families must undergo in that difficult time. The halt in death certificates seems to have only lasted a day or so, but as of October 1 the city’s vital records department will close for good and surrounding Wayne County will be responsible for all birth and death certificates in Detroit.

2. The Detroit Institute of Art (DIA) reluctantly brought in auction experts to appraise the city’s art collection. The DIA’s art collection is world-renowned, and museum officials say they will fight any effort to use those prized works as collateral in refinancing city debts. Emergency manager Kevyn Orr says he has no plan to sell the city’s art, although that everything is on the table. But on Thursday, experts and executives from the auction house Christie’s made their second visit to the DIA. Orr has hired the firm for $200,000 and reports say they will evaluate roughly 3,500 of the museum’s almost 70,000 pieces.

3. Detroit has four animal control officers and tens of thousands of stray dogs. One report put the total number of stray dogs in Detroit at 50,000, which would mean there was a stray for every 14 city residents. Local animal rescue activists say that number is inflated, but only somewhat. Everyone agrees that the city has just four dog catchers on its payroll, down from 11 just five years ago. The animal control department has a $1.6 million budget, but its director says the city has prevented him from spending that money on staff.

Meanwhile, 30,000 city workers and retirees risk having their health care and pensions cut or outright voided in the bankruptcy process. Their interests are squarely at odds with the financial interests of numerous investors, including hedge funds that have begun buying up the city’s debts for pennies on the dollar. Before the battle between investors and retirees can begin in earnest, however, Rhodes must rule on a variety of claims about the pre-bankruptcy conduct of Michigan Gov. Rick Snyder (R) and the emergency manager he appointed to oversee Detroit, Kevyn Orr. Key among these claims is that the men did not negotiate in good faith with the city’s creditors but rather pushed the city into bankruptcy as quickly as they could so as to curtail retirees’ rights. Emails between the two and other state and city officials seem to support that argument. If Rhodes finds the negotiations were proper and lets the bankruptcy proceed, his treatment of the Michigan constitution’s protections for pensioners will be key. While several other cities have faced bankruptcy in recent years, there is no real blueprint for what Motor City residents should expect.