Bankruptcy expert Kevyn Orr will have 18 months to save Detroit from financial ruin.
Kevyn Orr, the attorney who represented Chrysler during its successful restructuring, has been appointed by Michigan’s governor to “steer Detroit back from the brink of ruin.” Detroit is now the largest city in the US to be placed under the financial control of the state. According to the Associated Press, Orr will have “broad powers to control all spending, including renegotiating labor contracts, selling off assets and even suspending elected officials’ salaries.” His appointment is for 18 months, based on state law, but Orr insists it won’t take nearly that long to turn the city around.
Orr is very optimistic and “highly motivated” to get the job done. At the news conference where he was introduced he said, “We can rise from the ashes. This is a beautiful city and a wonderful state that gave me my start. I feel compelled to do this job.” But even being highly motivated Orr still has a hard uphill climb ahead of him. Detroit, once the “symbol of America’s industrial might,” now has a budget deficit of over $300 million, and long-term debt totaling more than $14 million.
Governor Rick Snyder turned to Orr after a review team appointed by the state, “determined that Detroit’s cash deficit meant the city would have to either increase revenues or cut spending — or both — by about $15 million per month for three months starting in January to ‘remain financially viable.'” Add to that the difficulties the City Council and the mayor had with being able to present a “workable turnaround plan,” and Gov. Snyder felt Orr was their best, and only option. The AP reports,
Mayor Dave Bing and the City Council, who fought the prospect of an emergency manager for months, will keep their jobs, but the manager will decide all financial matters. And only the manager will have the power to authorize the city to pursue bankruptcy.
Orr said the Detroit’s city charter “won’t let you do anything by compulsion. You can do everything by consent. … When I say consensual, I mean … let’s get at it and work together because we can resolve this.”
In a possible warning to city unions, vendors and others, he said: “Don’t make me go to the bankruptcy court. You won’t enjoy it.”
However, now that Orr has been appointed and the plans to turn the city around will begin to go into effect, Mayor Bing said, “The bottom line here is that we must stop fighting each other. We must start to work together. I’m happy that now I’ve got teammates. I’ve got partners that can help me do things that need to be done in our city.”
Photo: AP/Courtesy Jones Day Law Firm