Detroit Police Chief James Craig (Todd McInturf / The Detroit News)
Detroit— Police Chief James Craig testified Friday that poor working conditions, low morale and a depleted force justify the city’s need for bankruptcy relief to improve basic services.
“Everything’s broken,” Craig said during the third day of Detroit’s bankruptcy eligibility trial in federal court. “Deplorable conditions. Crime is extremely high, morale low.”
Craig became Detroit’s top cop in July, just weeks before the city filed the largest municipal bankruptcy petition in U.S. history. City officials want to shed billions of dollars in legacy costs to free more money to fix streetlights, remove blight and improve police response times.
He testified Friday before his boss, Emergency Manager Kevyn Orr, briefly took the stand to begin a lengthy account of why he filed for municipal bankruptcy.
Orr is expected to return to the stand Monday morning to start what is likely a pivotal day in Detroit’s quest for relief from unsecured creditors owed $11.5 billion. Gov. Rick Snyder is scheduled to testify Monday afternoon for up to four hours about his decision to authorize the bankruptcy.
The trial hinges on whether Orr’s team of lawyers and consultants can prove the city is insolvent and made a good faith effort to negotiate with scores of unions, retiree groups and the city’s pension funds before filing the case.
Much of the third trial day was consumed by creditor attorneys cross-examining New York City investment banker Kenneth Buckfire, one of the city’s numerous financial consultants, who touched on two of the most contentious issues of the case — the sanctity of public pensions and publicly owned art.
Buckfire, a Detroit native, revealed Orr’s restructuring team unsuccessfully pressed Detroit Institute of Arts officials to find common ground regarding ownership of the museum’s art — and a potential sale — before the bankruptcy filing.
“Those discussions did not prove fruitful,” Buckfire testified.
Under questioning about his behind-the-scenes involvement in providing financial advice, Buckfire acknowledged state officials and high-powered law firm Jones Day talked as early as March 2012 about having Detroit file Chapter 9 bankruptcy, 17 months before the city filed.
Buckfire initially said he couldn’t recall whether a bankruptcy filing was being considered in 2012.
Attorney Lynn Brimer, who represents retired city police officers, showed him an email that includes an exchange in March 2012 about a possible Detroit bankruptcy filing.
“So is it fair to say that as early as March 2012 the state and Jones Day were discussing a Chapter 9 filing for Detroit?” Brimer asked.
Buckfire paused momentarily. “Yes,” he said.
Jones Day wasn’t hired to work on the city’s restructuring until this year but spent about 1,000 hours in 2012 analyzing the city’s finances and relevant state laws as a potential business opportunity, according to evidence revealed in the trial.
During Craig’s testimony, he expressed support for police officers whose pensions could be cut during bankruptcy — as well as Orr’s intention to slash legacy costs.
“I am certainly concerned about pensions and I have my pension,” said Craig, who receives retirement pay and health insurance from his 28 years with the Los Angeles Police Department.
He spent much of his testimony speaking about sub-standard equipment his officers are forced to use because the city can’t replace it.
Craig testified he found 500 bulletproof vests were expired. The city didn’t have one for him, so he brought one from his former job as police chief of Cincinnati. The chief, who began his career as an officer in Detroit in 1977 before moving to Los Angeles, recounted a story of watching an officer jump-start an aging police cruiser.
The chief said he is dealing with a “cookie-cutter approach to staffing and deployment.” When he started, too many officers were sitting behind desks, working as dispatchers or doing tasks unrelated to policing Detroit’s crime-ridden neighborhoods, he said.
Twenty-three officers were assigned to Mayor Dave Bing’s security detail, Craig said, another officer was assigned “to gas and wash my car.”
He said he’s now redeploying officers and has winnowed the size of Bing’s detail.
AFSCME union attorney Sharon Levine objected to some of the police chief’s testimony, questioning how it was relevant to the city’s good faith negotiations and insolvency.
“The relevancy is arguable, but I’ll permit it,” U.S. Bankruptcy Judge Steven Rhodes said.
Also Friday, Rhodes allowed certain city financial records to be used as evidence of Detroit’s insolvency while also denying a motion by creditors to strike some testimony of Buckfire and city financial consultant Gaurav Malhotra.
Attorneys for labor unions and a committee representing retirees tried to get part of Buckfire’s testimony stricken from the record since the city didn’t qualify him as an expert witness.
Testifying as a lay witness with personal knowledge of Detroit’s financial meltdown, Buckfire said the city would “have no credit” if it didn’t make drastic reductions to its debts and legacy costs.
United Auto Workers attorney Peter DeChiara said Buckfire’s opinion about the city’s credit worthiness was as reliable as his taxi cab driver’s opinion since he wasn’t testifying as an expert.
“The court would not have allowed the taxi driver to answer those questions,” DeChiara argued.
The judge disagreed.
“It is certainly true that, as argued here, a taxi cab driver would not be permitted to testify as to these matters, but that doesn’t mean neither Mr. Malhotra or Mr. Buckfire can’t testify,” Rhodes said.
Gov. Rick Snyder is expected to testify at 1 p.m. Monday about why he authorized Emergency Manager Kevyn Orr to file for bankruptcy. Snyder told reporters Friday that he is not sweating the testimony, which is expected to last four hours.
“I would view it as a part of the process,” Snyder said.
“Let’s solve those 60 years of problems so we can grow the city and get better services to the citizens,” Snyder added.
Also Monday, Orr is expected to resume testimony. In order to qualify for bankruptcy, the city must prove it is insolvent, bargained with creditors in good faith, had proper authorization to file for relief and wants to reduce its debts.