‘We’re Tapped Out': Detroit Emergency Manager Proposes Plan To Creditors
DETROIT (WWJ) – There’s still a 50-50 chance Detroit will file for bankruptcy.
That’s according to Detroit Emergency Manager Kevyn Orr, who has detailed a plan for the city’s financial future in a 134-page proposal to creditors.
Orr on Friday sat down in a closed-door meeting with about 150 creditors, bond holders and unions to discuss the city’s fiscal situation, seeking concessions that would save Detroit millions of dollars in payments.
Perhaps the most dramatic aspect of his plan: Orr said, starting now, there will be a moratorium on debt payments for all unsecured funded debt. Creditors are being asked to take about 10 cents on the dollar of what’s owed them. Underfunded pension claims would get less.
This latest comes as Detroit continues to spend more money than it takes in as revenue. The city’s budget deficit could top $380 million by July 1, and Orr now estimates the city’s long-term debt at $20 billion.
“This is not a jaded effort just to get to a bankruptcy filing,” said Orr, addressing reporters following Friday’s meeting. “I sincerely want people to behave rationally and take this opportunity to work together.”
As part of the proposal, Orr said he wants to invest $1.25 billion in the city for police and fire; and $500 million to fight blight.
The plan also includes sweeping changes to pension and health care benefits, which Orr said he’ll discuss at a meeting with unions and pension leaders next Thursday.
“What the average Detroiter needs to understand is that where we are right now is a culmination of years and years and years of kicking the can down the road,” said Orr, adding that his proposal should not be seen as a “hostile act” but as a step in the right direction.
“We’re tapped out,” Orr said. “We need to come up with a plan to restructure our debt obligations and our legacy obligations going forward — that is: pension, other employee benefits, health care, so on and so forth.”
Orr said there are about 10,000 current city workers, roughly 20,000 city retirees, and 700,000 Detroit residents.
“We have to strike a balance between our legacy obligations to our creditors, our employees and our retirees, and the duty we have as a city to 700,000 residents to give them lights, police, fire, emergency management, clean streets,” Orr said.
As part of his report, Orr details what led the city to this point. “During the past several decades, the City of Detroit (the “City”) has experienced changes that have adversely affected the economic circumstances of the City and its residents,” the report states — citing, among other thing, the city’s declining population, high unemployment rate, eroding tax base, high crime rate, and plummeting credit rating.
What Orr’s proposal does not include is the much-discussed possibility that Detroit should sell Belle Isle, or the Detroit Institute of Arts’ collection.
Orr, a Washington-based bankruptcy attorney, was hired by the state in March after a financial emergency was declared in Detroit.