Detroit Lays Out Hard Road From Fiscal Ruin
Detroit — Detroit emergency manager Kevyn Orr laid out yesterday an extraordinary, complex and painful path back to solvency for the City of Detroit in a proposed plan to creditors that promises at the same time a way out of the financial mess that has crippled public services and a path for future growth.
Orr’s plan would spin off the city’s water department, reduce city-provided health care for retirees and current workers and immediately stop debt payments. The city missed a $39.7 million payment to an unsecured creditor yesterday. The money for such payments will instead be used to keep the city operating. Orr’s plan calls for reinvesting $1.25 billion over the next decade to boost crucial services like police and fire, step up blight removal and transform the operations of an antiquated, failing city government.
The impact of the document Orr released publicly and to creditors in a historic meeting yesterday cannot be overstated.
Orr and his team discussed a staggering amount of liabilities — as much as $20 billion — as they met with as many as 150 creditors called together in a bid to win an out-of-court settlement of the city’s financial collapse or, at least, a municipal bankruptcy proceeding in which most creditors would agree to deals before a Chapter 9 petition is filed.
“Detroit’s road to recovery begins today,” Orr said. “Financial mismanagement, a shrinking population, a dwindling tax base and other factors over the last 45 years have brought Detroit to the brink of financial and operational ruin. We cannot repeat the mistakes of the past. The city, its region and the country deserve better.
“Our plan,” he added, “is bold, because aggressive action is required to get Detroit back on its feet and improve the quality of life for the people who call Detroit home.”
During a news conference after the two-and-a-half hour closed-door creditor meeting, Orr said he understands that stakeholders, from bondholders to city workers and retirees, may be shocked by the cuts they’ll be asked to take. He said the report he issued lays out an unprecedented look at the city’s financial condition and lays bare that Detroit cannot possibly pay back the liabilities it has racked up over the decades.