Detroit to exit historic bankruptcy

Go Lean Commentary

The publishers of the book Go Lean…Caribbean are here to “observe and report” the turn-around and rebirth of the once-great but now distressed City of Detroit. The book posits that the Caribbean can learn a lot from the strategies, tactics and implementations to mitigate this community’s “failed-state” status.

The quest starts now, as Detroit is now emerging from the Bankruptcy Court’s oversight, according to the following article and VIDEO:

By: Serena Maria Daniels
CU Blog - Detroit to exit historic bankruptcy - Photo 1DETROIT (Reuters) – Detroit will officially exit the biggest-ever U.S. municipal bankruptcy later on Wednesday, officials said, allowing Michigan’s largest city to start a new chapter with a lighter debt load.

The city, which filed for bankruptcy in July 2013, will shed about $7 billion of its $18 billion of debt and obligations.

“We’re going to start fresh tomorrow and do the best we can to deliver the kind of services people deserve,” said Mayor Mike Duggan.

Once a symbol of U.S. industrial might, Detroit fell on hard times after decades of population loss, rampant debt and financial mismanagement left it struggling to provide basic services to residents.

Later on Wednesday, payments to city creditors will be triggered under a debt adjustment plan confirmed by a U.S. Bankruptcy Court judge last month.

Most of the settlements with major creditors, including Detroit’s pension funds and bondholders, will be paid with a distribution of about $720 million of bonds. The city will also reissue $287 million of existing bonds and borrow about $275 million from Barclays Capital to finance its exit from bankruptcy.

Along with the debt, the exit plan relies heavily on the “Grand Bargain,” where foundations, the state and the Detroit Institute of Art will contribute $816 million over time to ease pension cuts and protect city-owned art work from sale. The plan also aims to provide Detroit with $1.7 billion through June 30, 2023, to improve city services and infrastructure.

Wednesday also marks the end of Kevyn Orr’s 21-month term as Detroit’s state-appointed emergency manager. He told reporters that the city was wrapping up wire transfers, disbursements and other matters to end the historic bankruptcy.

“There may be some other administrative things the court may have to handle but the city will have emerged from bankruptcy,” Orr said. “12:01 a.m. tomorrow morning the city will be out of bankruptcy. I will no longer be the emergency manager. I will be unemployed.”

Orr’s departure returns complete control of Detroit to Duggan and the nine-member city council. However, the city will have a nine-member, state-created oversight board in place to approve financial matters.

In confirming the bankruptcy plan, Judge Steven Rhodes raised questions about possible conflicts of interest from having Duggan and a city council member sit on the board.

“The city is running the city, with some financial oversight on budgetary matters,” said Michigan Governor Rick Snyder about the financial review commission. “My goal is probably to have (the commission) be as least active as possible.”

The Republican governor told Reuters in an interview that the commission will help ensure Detroit does not slip back into bankruptcy. He also ruled out direct financial aid to the city in the future.

“We’re not really aiming to be there as a backup to the city in terms of financial resources,” Snyder said. “We’re there to be a supportive partner.”

He added that many of the other 16 local governments and school districts under state oversight in Michigan are “transitioning out of their problems” without the aid of bankruptcy.

“People should not be aspiring to go into bankruptcy to solve your problems. It’s tough process and it’s a last resort.”

Orr said court-ordered mediation on fees paid to consultants during the bankruptcy process was continuing on Wednesday. Outside lawyers and consultants charged the city more than $140 million, sparking protests from Duggan. Orr said some of the issues were “resolved last week.”

With the exit, “all of the consultants are being phased out pretty quickly,” Duggan said.

(Writing and additional reporting by Karen Pierog in Chicago and Lisa Lambert in Washington; editing by Matthew Lewis)
Reuters News Service (Posted and retrieved 12-10-2014) –;_ylt=AwrBEiEC54hUwgYAliTQtDMD

The Go Lean book relates that economic empowerment can be heightened to alleviate distressed communities by exercising mastery of destruction arts and sciences – salvage, removal, recycle, redevelopment, rebirth and reboot – activities that can greatly benefit a city by “right-sizing” the infrastructure to the population.

This impacts the Greater Good.

The Go Lean book serves as a roadmap for the introduction and implementation of the Caribbean Union Trade Federation (CU) to elevate Caribbean society. While Detroit is not in scope for this effort, an examination of the details of Detroit – fall and rebound – can be productive for the Caribbean effort. The CU/Go Lean roadmap therefore has these 3 prime directives:

  • Optimization of the economic engines in order to grow the regional economy to $800 Billion GDP and create 2.2 million new jobs.
  • Establishment of a security apparatus to protect the resultant economic engines.
  • Improve Caribbean governance to support these engines.

Early in the Go Lean book, the point of lessons from Detroit is pronounced in the opening Declaration of Interdependence (Page 14), with this opening statement:

xxxiii.   Whereas lessons can be learned and applied from the study of the recent history of other societies, the Federation must formalize statutes and organizational dimensions to avoid the pitfalls of communities like … Detroit…

According to the foregoing article and VIDEO below, the City of Detroit is now emerging from the Bankruptcy (BK) protection commenced in July 2013. Though the BK proceedings are over, the crisis continues. The city still has to create opportunities for their citizens, present and future, or risk further abandonment by its population. The possibility is very real that Detroit will invest heavily in the education of their youth, only to watch them leave and prosper in other communities. This is a disposition (brain drain, unemployment, urban blight and acute hopelessness) that is too familiar for Caribbean communities. This is why the study of Detroit is such an ideal model for the Caribbean region.

The foregoing article relates that the financial crisis was not just a problem for the one City of Detroit but also “16 local governments and school districts[1] under state oversight in Michigan”. This was a Michigan/regional challenge; all exacerbated by the 2008 Great Recession financial crisis.

Previous Go Lean blogs highlighted Michigan, Detroit and other failed-state-city dynamics; as detailed here:

Michigan Unemployment – Then and Now
Making a Great Place to Work® – Model of a Michigan Company
Where the Jobs Are – Entrepreneurism in Turn-around
A Lesson in History: Lessons of the Failed East Berlin
Urban Crisis – The Geography of Joblessness
A Lesson in History: Community Ethos of Once Great Detroit During WW II
JP Morgan Chase $100 million Detroit investment not just for Public Relations

The foregoing news article also relates the financing options for Detroit’s recovery, which are heavy focused on municipal bonds in the securities market. The Go Lean roadmap likewise presents a plan, beyond banking, to generate funding to Pay for Change (Page 101). This CU/Go Lean effort is focused on forging change in the region; this does not start with BK proceedings (which are not available in the Caribbean), rather it must start with attitudes and motivations to reject the status quo. This positive attitude is defined in the book as a community ethos. One such ethos is “turn-around”, defined as having a collective vision, demand for change and appropriate steps and actions.

The book details other ethos to adopt, plus the executions of the following strategies, tactics, implementations and advocacies to impact the rebirths, reboots and turn-around of Caribbean communities:

Community Ethos – Deferred Gratification Page 21
Community Ethos – People Respond to Incentives Page 21
Community Ethos – Job Multiplier Page 22
Community Ethos – Light Up the Dark Places Page 23
Community Ethos – “Crap” Happens Page 23
Community Ethos – Lean Operations Page 24
Community Ethos – Return on Investments (ROI) Page 24
Community Ethos – Ways to Impact the Future Page 26
Community Ethos – Ways to Help Entrepreneurship Page 28
Community Ethos – Ways to Impact a Turn-Around Page 33
Community Ethos – Impact the Greater Good Page 37
Strategy – Customers – Foreign Direct Investors Page 48
Tactical – Fostering a Technocracy Page 64
Tactical – Modeling Post WW II Germany – Marshall Plan Page 68
Tactical – Modeling Post WW II Japan – with no Marshall Plan Page 69
Separation of Powers – Public Works & Infrastructure Page 82
Separation of Powers – Housing and Urban Authority Page 83
Separation of Powers – Exclusive Federal   Bankruptcy Courts Page 90
Implementation – Ways to Pay for Change Page 101
Implementation – Ways to Re-boot Freeport – Sample Failed City Page 112
Planning – Ways to Improve Failed-State Indices Page 132
Planning – Lessons Learned from 2008 Page 136
Planning – Lessons from Detroit Page 140
Advocacy – Ways to Grow the Economy Page 151
Advocacy – Ways to Create Jobs Page 152
Advocacy – Ways to Improve Local Government Page 169
Advocacy – Ways to Better Manage the Social Contract Page 170
Advocacy – Ways to Improve Leadership Page 171
Advocacy – Ways to Preserve Caribbean Heritage Page 218

The foregoing news article aligns with the publishers of the Go Lean book, the SFE Foundation, a community development foundation chartered for the purpose of empowering and re-booting economic engines. The foundation does the heavy-lifting of working with individuals, families, communities and nation-states to turn-around financial viability.

Bankruptcy is not an option for the failing Caribbean member-states, yet the region can still explore formal reboots. The Go Lean roadmap provides a complete plan to reboot Caribbean economic-security-governing engines. The region is hereby urged to lean-in to this roadmap, to make the homeland a better place to live, work and play. 🙂

Download the book Go Lean…Caribbean now!


. Source References
Michigan municipalities under Emergency Management oversight: Allen Park, Benton Harbor, Detroit, Ecorse, Flint, Hamtramck City, Highland Park, Pontiac, Three Oaks Village, Detroit Public School District, Muskegon Heights Public School District, and Highland Park School District. Retrieved December 10, 2014 from:

2. VIDEO Detroit emerges from bankruptcy

The City of Detroit will officially emerge from bankruptcy on Wednesday. Emergency Manager Kevyn Orr said the city no longer will be in a financial emergency when it officially exits bankruptcy. The governor, emergency manager and Mayor Mike Duggan joined to make the official announcement Wednesday morning.

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