Michigan Gov. Rick Snyder (R) signed off on the city of Detroit's Chapter 9 bankruptcy filing on Thursday, instigating the largest municipal bankruptcy case in the nation's history. The filing was made in U.S. District Court for the Eastern District of Michigan after Kevyn Orr, the emergency manager Snyder appointed in June to help Detroit through a major reconstruction of its finances, could not reach agreements with enough of the troubled city's bondholders, pension funds and other creditors to restructure its debt outside of court. Snyder had final approval over whether to make the filing. He gave that approval in a letter attached to documents submitted to the court. In a statement later posted on his gubernatorial Web site, Snyder called the filing "a difficult, painful step" undertaken only when it became clear that no "other viable option remained" for the city. He said the city's troubles were "six decades in the making," noting it currently spends 38 cents of every city dollar on debt service and other legacy costs. That figure, he said, would climb to 65 cents on the dollar by 2017. "Detroit is broke," he added, saying bankruptcy can put the city "back on the right path...so Detroiters can have a better quality of life." The filing came one day after two Detroit unions filed suit against Snyder and Orr alleging they did not have the constitutional authority to authorize a bankruptcy filing that could ultimately reduce pension benefits. The suit - brought forth by the city's General Retirement System and the Police and Fire Retirement System of the City of Detroit — join two others filed by individual retirees earlier this month. Bill Nowling, Orr's spokesperson, decried the suits. "Pension boards, insurers, it's clear that if you're suing us, your response is 'no.' We still have other creditors we continue to have meetings with, other stakeholders who are trying to find a solution here, because they recognize that, at the end of the day, we have to have a city that can provide basic services to its 700,000 residents," he said. The filing begins a 30- to 90-day period to determine if Detroit is legally eligible for Chapter 9 protection. The city has current liabilities of almost $19 billion. Its assets are less clear, though Orr has repeatedly said the city is insolvent, a requirement to qualify for Chapter 9 protection. Creditors may challenge the city's assertion, though none aside from the unions has stepped up yet to do so. Meanwhile, the filing ensures that an automatic stay is placed on most of the city's bills, though Detroit will continue paying secured creditors like water and sewer bondholders. Lawsuits like those filed by the two unions will also be stayed, and will likely move into bankruptcy court if the city's Chapter 9 request is granted. The court will also decide how many claimants will be allowed to compete for whatever money the city does have. Although some observers have questioned whether bankruptcy will drive even more of the city's businesses out of town, General Motors, one of its major employers and also a recent bankruptcy participant, said the filing would ultimately help the city more than harm it. "GM is proud to call Detroit home and today's bankruptcy declaration is a day that we and others hoped would not come," the company said in a statement released shortly after the news broke. "We believe, however, that today also can mark a clean start for the city." (USA TODAY, DETROIT FREE PRESS, REUTERS, BLOOMBERG, BOSTON GLOBE, WALL STREET JOURNAL) HEAT BUILDING ON MCDONNELL: The ethics scandal embroiling Virginia Gov. Robert M. McDonnell (R) has driven his approval ratings to a new low, spurring Democrats and even some Republicans to call for his resignation. McDonnell has been dogged of late by revelations that he accepted over $145,000 in gifts from Virginia businessman and political donor Jonnie Williams, gifts that included $70,000 in cash delivered to a real estate development company owned by McDonnell and his sister, a $50,000 loan to First Lady Maureen McDonnell, a $6,500 Rolex watch and a $15,000 New York City shopping spree for Ms. McDonnell. The Washington Post has also reported that Williams picked up a $15,000 catering tab from the June, 2011 wedding of the McDonnell's daughter Cailin and gave another daughter, Jeanine, a $10,000 check for her May, 2013 wedding. State and federal regulators are investigating whether those gifts violated any laws. McDonnell has steadfastly denied any wrongdoing, and so far has not been charged with any crimes. But the ongoing coverage has definitely hurt his standing with the public. A new Quinnipiac University poll released last Wednesday showed his approval rating has dropped to 46 percent, a 3 percent drop from a May poll and his lowest mark as governor. The scandal has inspired a small number of Old Dominion Democrats to call for McDonnell to step down. Del. Scott A. Surovell (D) has been the most vocal, suggesting that the governor should step down on his own, but that if he does not "other measures should be on the table." Democratic Sens. Barbara Favola and Chap Petersen have also publicly called for McDonnell's resignation. But barring investigators finding truly damning evidence of malfeasance, most observers doubt he would do so with only six months left in his term no matter how much political pressure Democrats put on him. But the heat started coming from a different direction last week: from his own party. Shaun Kenney, a former spokesperson for the Republican Party of Virginia and current Chairman of the Fluvanna County Board of Supervisors, said he believes McDonnell should resign. Kenney says McDonnell's actions "cross the ethical plane" even if he has technically not crossed any legal boundaries. "The bar for resignation isn't legal or illegal. It's not even ethical versus unethical. It's right or wrong," he said, adding "I'm certain that there are other Republicans who feel this way." Through various spokespersons, McDonnell — once one of the most popular governors in the nation and someone who was on the short list to be Mitt Romney's running mate in the 2010 presidential election — has vigorously denied he will step down. (WASHINGTON POST, RICHMOND TIMES-DISPATCH, NEWSPLEX.COM)
The above article is provided by the State Net Capitol Journal. State Net is the nation's leading source of state legislative and regulatory content for all states within the United States. State Net daily monitors every bill in all 50 states, the District of Columbia and the United States Congress - as well as every state agency regulation. Virtually all of the information about individual bills and their progress through legislatures is online within 24 hours of public availability.
To subscribe to the Capitol Journal and access archived issue go to the State Net Capitol Journal
If you are a lexis.com subscriber, you can access State Net Bill Tracking, State Net Full Text of Bills, or State Net Regulatory Text. If you are interested in learning more about State Net, contact us.
For more information about LexisNexis products and solutions connect with us through our corporate site.