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Emergency Manager Shocked By Tolerance For Detroit Mismanagement

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(Photo: George Fox/CBS Detroit) Governor Rick Snyder and emergency manager Kevyn Orr discuss Detroit's bankruptcy filing.

(Photo: George Fox/CBS Detroit) Governor Rick Snyder and emergency manager Kevyn Orr discuss Detroit’s bankruptcy filing.

DETROIT (WWJ) –  Detroit Emergency Manager Kevyn Orr says citizens should be outraged by the state of the city’s finances.

Those words come at a historic news conference Friday, less than 24 hours after the city filed for Chapter 9 bankruptcy protection — the biggest municipal filing in U.S. history —  and months after a financial emergency was declared in the city.

Orr, hired by the state, estimates the city’s long-term debt at $20 billion.

“I think the depth and some of the practices deferring pension obligations … what shocked me wasn’t the numbers — because you can put zeros behind digits and create more numbers. What shocked me was the tolerance for this behavior for decades,” Orr said.

“This has been going on for a very long time and, to say the least, this is at best unorthodox, in  terms of how these things were going,” Orr said. “Frankly, I’m surprised … I know a lot of people were outraged by my appointment … I wish there had been a lot more outrage over the past 10, 20 years.”

Orr said roughly $3.5 billion of the city’s long-term debt has to do with unfunded pension obligations. On top of that, said Orr, health care is totally unfunded.

“Now, I’ll put aside the question of how that happened over the past 20, 30 years — and no one set aside a dime to deal with health care for the citizens,” said Orr. “But the reality is there are two types of creditors: there are secured and there are unsecured. And what you must do is treat people in their class — secured and unsecured — equally.”

Orr laid our what the city has to work with. He said Detroit has a $1 billion budget, and 38 percent of that is legacy costs; 48 percent is fix costs for staples such as police, fire and EMS.   That leaves less than 20 percent for everything else.

The city is basically broke, said Gov. Rick Snyder.

“Currently those creditors have a situation where they don’t know what they’re gonna get paid and if they’ll get paid at all,” said Snyder, standing beside Orr and before a contingent of reporters, notably larger than the usual crowd.

“This process will allow us to give them some certainty to say this is a debt that can be paid, and will be paid.” Snyder said.  He said the city will present a plan of adjustments for debts owed.

Snyder said it’s been a long period of decline in Detroit, and now is the time to do something about it. With “unacceptable” 58-minute emergency response times, he said the 700,000 residents of Detroit deserve better.

“I deeply respect the citizens of Detroit. They deserve a better answer and they hired me to give them a better answer,” Snyder said.

“Many may step back and say, this is the lowest point in Detroit history … the history books may say that,” said Snyder. “This is our opportunity to say this may be the low day, but this is the day to stabilize Detroit … Let’s get Detroit on the path to being a great city again … Today is a major step to getting on that path.”

MORE:  Detroit Files For Bankruptcy

Union Attorney: Pensions In Jeopardy After Detroit Bankruptcy Filing

DIA Vulnerable Under Detroit Bankruptcy

Stay with WWJ and CBSDetroit.com for continuing coverage.

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