Detroit was operating on a "razor's edge" and had no options to avoid running out of cash and filing for bankruptcy, the city's top advisor testified yesterday in a trial to determine whether the city is eligible to file the largest municipal bankruptcy in U.S. history, Reuters reported yesterday. Kenneth Buckfire, the city's top outside financial advisor, said that the city tried to avoid filing for bankruptcy in July by cutting expenses and looking at city assets that might be sold to raise cash. Buckfire, an investment banker hired by the city in January to advise on its financial restructuring, described in his testimony the city's search for cash in the weeks before the state-appointed emergency manager, Kevyn Orr, determined that a bankruptcy filing was Detroit's best option. Detroit's best source of revenue was its three casinos, which brought in about $180 million a year, or 20 percent of the city's budget, Buckfire testified. But those funds have been locked up since they were pledged as collateral to interest-rate swap contracts agreed to in 2009; the city now hopes to use them as collateral on $350 million of debtor in possession financing to end the unfavorable swap deals. Buckfire's testimony was part of Detroit's efforts to convince Bankruptcy Judge Steven Rhodes that Detroit meets the legal requirements of municipal bankruptcy. The city expects to wrap up its case today. Rhodes is not expected to make a ruling on eligibility until at least mid-November.
