Why Judge Rhodes Let Detroit Out of Bankruptcy

U.S. Bankruptcy Judge Steven Rhodes approved Detroit’s bankruptcy plan and effectively ended the largest municipal bankruptcy in U.S. history during the first 34 seconds of a hearing on Friday afternoon. He spent the next 107 minutes explaining why. Here is Judge Rhodes in his own words:

Not everyone liked the plan, including some retirees, but there’s only so much money to go around, Judge Rhodes said on Friday. The city’s failure to provide basic services that protect residents’ health and safety is “inhumane and intolerable, and it must be fixed,” he said. “There really is no choice here.”

Judge Rhodes explained why city leaders can cut retirees’ monthly pensions despite wording in Michigan’s constitution that prohibits such cuts. Even if retirees appealed and won, the city would still have no ability to pay the full pensions, Judge Rhodes pointed out.

Why shouldn’t the city be forced to sell its art? Judge Rhodes noted that the art has special legal protections, including ones designated by donors.

In fact, Judge Rhodes got pretty darn passionate about the Detroit Institute of Arts, saying it’s a place for personal journey and a symbol of civic pride. It’s those kind of things that “Detroit must pursue to uplift inspire and enrich its residents.”

Why shouldn’t Detroit simply raise its taxes? Judge Rhodes said they’re already high.

Judge Rhodes made it clear that the plan doesn’t fix all of the city’s troubles, and he wasn’t shy about telling elected leaders to keep their eye on the ball. He reminded Michigan leaders that the state has a duty to supervise it cities and counties to make sure they aren’t making irresponsible financial promises. And memo to newly re-elected Gov. Rick Snyder: the commission that monitors Detroit’s finances has two spots for elected city leaders, undermining the effectiveness of that group. Judge Rhodes also urged unions to focus on the city’s revitalization efforts, not just on protecting pensions.

Summing up, Judge Rhodes said Detroit’s bankruptcy was pretty much like every other bankruptcy, preceded by big mistakes, risks, denial, bad advice and “just plain bad luck.” But no matter, Judge Rhodes said. “Our society holds dear the value of a fresh start and of second chances. That value is manifest with brilliant clarity in our bankruptcy laws.”

Write to Katy Stech at [email protected]. Follow her on Twitter at @KatyStech.