22 July 2014

Acceleration in Detroit: It's Feasible!

I haven't posted incessantly about the Detroit Chapter 9 bankruptcy. At least I don't think I have. (You can judge for yourself by going here, here, here, here, and here for my "Top 5.") I'll post later on the early voting results but today I'll post a link here to the "Expert Report of Martha E.M. Kopacz Regarding the Feasibility of the City of Detroit Plan of Adjustment." Ms. Kopacz's Feasibility Report is a big deal because the bankruptcy court must find that a city's plan is feasible in order to confirm it. In other words, even if everyone voted in favor of the plan, it could not be approved if the court did not believe it was feasible.

Well, one might think, if feasibility is such a big deal, just what is it? How does the law define "feasibility." Good luck looking for a definition; there isn't one. Which is a point made in the Feasibility Report by a citation to my yet-unpublished article, Who Bears the Cost? The Necessity of Taxpayer Participation in Chapter 9 (which you can download for yourself by going here). (I had presented an earlier version of this article at the Widener Law Journal symposium in April.)

Law professors often wonder what happens to what we publish. Does anyone read it? Does it make a difference? One way to measure the effectiveness of legal scholarship is to see how often and where others cite to it, and so the quote from my article in the Feasibility Report represents a bit of validation for my efforts. And what was the quote?
What is merely unclear in chapter 11 is an impenetrable fog in chapter 9. Section 1129(a)(11) of the Bankruptcy Code is not incorporated into chapter 9.131 Instead, section 943(b)(7) simply makes an undefined “feasibility” a requirement of confirmation of a plan of adjustment.
But back to the Feasibility Report. It's 226 pages long (although that count includes some appendices) so it's a bit of a slog to read it. Two points stand out. First, Ms. Kopacz provides her definition of feasibility on which she will base her ultimate conclusion:
Is it likely that the City of Detroit, after the confirmation of the Plan of Adjustment, will be able to sustainably provide basic municipal services to the citizens of Detroit and to meet the obligations contemplated in the Plan without the significant probability of default.
Second, is the Feasibility Report's bottom line:
Based on this work, I conclude that:
(a) The City’s plan is feasible as required by 11 U.S. C. § 943(b)(7); and
(b) The assumptions that underlie the City’s plan of adjustment projections regarding its revenues, expenses and plan payments are reasonable.
I won't pursue any further details at this point although I am particularly interested to know how the Feasibility Report decides which municipal services are "basic" and which can be jettisoned. That question is the subject of the article on which I am currently working for a symposium at Campbell University Law School that will take place in October. Too late for Detroit's confirmation hearing (set to begin in mid-August), which means I'll be able to use what happens in Detroit as grist for the mill.

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