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Posted: Thursday, 09 July 2009 12:23PM
More Discussions Concerning DPS Bankruptcy
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Detroit (WWJ) -- He's said in the past all options, including bankruptcy, must be considered. This morning, Detroit Public Schools Emergency Financial Manager Robert C. Bobb and other administrators met with retired bankruptcy judge Ray Reynolds Graves and other attorneys to discuss the possibility of filing for bankruptcy protection.
The key question is whether filing for Chapter 9 bankruptcy would make sense for the school system.
This is a "very sad moment for the Detroit Public Schools system, from a financial standpoint,'' Bobb told reporters prior to the meeting at the Fisher Building.
The district is struggling with a legacy of deficits and seven years of overspending, despite having reserves of more than $103 million as recently as 2002, he said.
Those reserves were spent by 2004, and , and the district was "on the brink of bankruptcy'' by 2005, Bobb said.
"Not many private businesses would be in business,'' he said.
Chapter 9 allows governmental units to restructure, said Graves, who served as judge for the Eastern District of Michigan.
The group will review the obligations and rights of the district's bond holders, vendor and suppliers, and collective bargaining agreements, Graves said.
Bobb has ordered the permanent closings of 29 schools by the fall to cut costs. More than 1,700 employees, including more than 1,000 teachers, have received layoff notices.
Enrollment, reported last fall at about 96,000 students, is expected to drop to 83,777.
Bobb was brought in to Detroit in March to oversee the district's finances. In his nearly four months in office, Bobb has cut the district's budget deficit from about 400-million dollars to 259-million dollars.
Meantime, the Detroit Children's Museum, on Second Avenue north of Wayne State University, may have to close by August 6 because of funding issues. The district spends nearly one-half million dollars in general fund money to support the museum, but has been looking at all expenditures.
Supporters of the museum, which opened in 1917 as a joint operation between DPS and the Museum of Art but has been operating under the school district alone since 1925, are working to spin off the museum as a self-supporting institution, said Jennifer Roberts, a board member of the Children's Museum Friends, which raises about $70,000 a year for the museum.
"The goal is not to close it but restructure it as an independent entity that no longer depends on the budget fluctuations and the bureaucracy of DPS,'' said schools spokesman Steve Wasko.
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© MMIX WWJ Radio, All Rights Reserved. The Associated Press contributed to this report.
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