Black fascist corporate agents David Bing, Kevyn Orr and their white overseer Rick Snyder. The banks are enslaving Detroit to seize public assets and pension funds to gamble away on Wall Street., a photo by Pan-African News Wire File Photos on Flickr.
EM to offer glimpse at Detroit's 'perfect storm of financial ruin'
11:39 am
detroitnews.com
Emergency Manager Kevyn Orr's 45-day report on Detroit's financial condition, coming Monday, will be a series of messages to lenders, unions and pension funds. They are expected to help execute a sweeping restructuring of city government, preferably outside bankruptcy court.
"It's going to be sobering," Bill Nowling, a spokesman for Orr, said in an interview Thursday. "We want people to understand the enormous magnitude of this. People here in the city are almost immune to the notion of how bad it is because they've heard it so many times.
"This will put in one full brush stroke the breadth and depth of the financial emergency that the city is now facing. You cannot read this and go away not thinking, 'I don't know how the city has been able to hold it together for so long.' This is a perfect storm of financial ruin hanging over the city."
The most critical targets are the financial interests of Wall Street, labor and pension funds, officials and experts say, whose long-term obligations must be renegotiated or risk bankruptcy. Equally important are the Detroiters inured to the depth of the city's problems, as well as federal judges who could be called upon to oversee the largest Chapter 9 filing in American history.
How Mayor Dave Bing, City Council and residents react over the coming days and weeks will be important and widely covered in the news media. But the cold, hard reality is that their collective action — or refusal to act — is secondary to moving in what Orr behind the scenes is calling "another direction" for the city.
In theory, anyway. Whatever Orr's powers as emergency manager under Public Act 436, the Washington lawyer cannot force interests opposed to his office to accept uncritically a grim financial diagnosis drafted with the help of outside consultants hand-picked by the state Treasury.
"Any reasonably intelligent person would not argue that Detroit does not have serious financial problems," said Patrick O'Keefe, founder and CEO of O'Keefe LLC, a Bloomfield Hills-based firm specializing in turnaround consulting and bankruptcy services. "Creditors will push back. But … they will take a haircut or restructuring of their indebtedness if it makes economic sense."
Reviews by Treasury, culminating in March with Gov. Rick Snyder's declaration of a financial emergency in Detroit, found the city's deficit to be running close to $380 million on a $1.1 billion budget. Long-term liabilities exceed $14 billion, with $1.5 billion due over the next five years. Credit ratings are wretched, blocking the city's ability to borrow.
Orr has spent much of the past six weeks burrowing more deeply into the city's books and its operations, pushing beyond the facts of Detroit's dysfunction in an effort to explain it and begin to propose solutions. He will need to build his case in plain, unvarnished English devoid of legalese, fancy financial terms and politicized blame.
He'll argue why the city cannot afford to fund 20 separate health insurance plans for its employees, as the report will show; how Detroit's total spending on police and fire, not necessarily wages, is wildly out of step with similar cities; how pension and retiree health care obligations are unsustainable and must be renegotiated.
As difficult as an actual restructuring is likely to be, Orr and his team also believe they face a daunting task to illustrate unambiguously the depth of Detroit's problems and the need for comprehensive, even radical, solutions.
City residents, employees and elected officials are chronically unmoved by predictions of impending calamity that never seems to arrive. Interested bystanders in the suburbs and across the state may know little concrete about Detroit's problems, except that they don't want to pay for its rescue.
And New York financial types may be ready to finance a risky interest-rate swap deal engineered by the Kilpatrick administration — and reap millions in fees. But Orr and his team are less certain even those holding Detroit debt appreciate the scale of the city's financial problems or how much bondholders will be asked to sacrifice to help fix them.
The 50-page report, required 45 days into an emergency manager's tenure, is intended to be "a very detailed snapshot" of the challenges facing the city, Nowling said. It will be more a "punch list of what needs to be done," and less a series of directions for how to do it.
"Bear in mind, whatever plan he submits is going to change," said Doug Bernstein, managing partner of Plunkett Cooney's banking, bankruptcy and creditors' rights practice group. "Bankruptcy is a constant series of negotiations."
Monday's EM report amounts to Orr's first public gambit in those multi-pronged talks. The complicated series of bargaining sessions would air Detroit's bad habits to a world already largely convinced of its dysfunction, determining whether it is destined to negotiate the obligations of its past outside a federal courtroom or litigate it within.
"This is the largest city to ever stare bankruptcy in the face," Nowling said. "We don't think that's a foregone conclusion, but we have to be cognizant of the reality we face."
daniel.howes@detroitnews.com
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