RSS Feeds

Detroit manager to listen, then assess priorities

Sunday - 3/24/2013, 2:50pm  ET

FILE - In this March 14, 2013 file photo is the skyline of the city of Detroit. Kevyn Orr, Detroit’s state-appointed emergency manager, has yet to step into his Detroit office, but the acclaimed bankruptcy lawyer knows the clock already is ticking down on the future of the city and an 18-month stint in which he’ll try to complete what he says will be one of the greatest fiscal turnarounds in U.S. history. (AP Photo/Paul Sancya, File)

Associated Press

DETROIT (AP) -- A bankruptcy lawyer and turnaround expert tasked with reviving Detroit's beleaguered finances could be greeted by a crowd of protesters as he arrives at work Monday, then plans to spend his first day meeting with some city officials who for months fought against creating his job at all.

Kevyn Orr is under no illusions that he'll be treated as a hero when he begins his duties as the Motor City's emergency manager, an appointment that makes Detroit the nation's largest city ever put under state control. But while there are plenty of sacrifices -- including Orr's resignation from a powerful law firm where he was a partner -- Orr says he is motivated by the opportunity to engineer one of the greatest fiscal turnarounds in U.S. history.

"I'm a worker bee. I'm not a honey bee," Orr, 54, told The Associated Press in an interview. "My set-in-stone plan is to get to the office ... and start meeting folks."

A review team spent two months scrutinizing Detroit's books and reported to Gov. Rick Snyder that the city was in a financial emergency, citing its long-term debt of more than $14 billion and $327 million budget deficit.

Snyder agreed and earlier this month announced Orr, a Washington attorney who represented automaker Chrysler LLC during its successful restructuring, as the man for an even larger fix-it task. State law allows emergency managers to negotiate labor contracts and deals with vendors. He can sell off city assets to raise money and cut the salaries of elected officials to save bucks.

Opponents, led by a vocal group of Detroit clergy and residents say the law snatches power from elected officials. National civil rights leader the Rev. Jesse Jackson has called for mass demonstrations and protests outside City Hall.

Orr insists he has no immediate plan of action other than getting a sense of the city's priorities.

"You really want to look into the swimming pool to see if there is water in there before you dive in," said James Spiotto, a municipal bankruptcy expert at the Chicago-based Chapman and Cutler law firm.

But turnaround specialist James McTevia said he finds it hard to believe that Orr enters the job without any idea about what he intends to do. McTevia, who has closely followed the Detroit situation, suggests that one of his first steps should be an immediate freeze on debt spending.

"The first step in resolving a serious financial problem is to stop fueling the fire by spending money you don't have," McTevia said.

Early success could be crucial for Orr to win over citizens who are skeptical about whether an emergency manager really is needed, bankruptcy expert Doug Bernstein said. Such victories can be as simple as getting "street lights on and get police on the street," he said.

"Public safety is paramount," said Bernstein, managing partner of the Banking, Bankruptcy and Creditors' Rights Practice Group for Michigan-based Plunkett Cooney law firm. "This is such a hot area where people are passionate about whether there should or not be an emergency manager. It would likely go a long way to convince those who are against, or otherwise opposed to the concept, that this can lead to something good or rehabilitation for the city."

Beyond public safety, a host of other problems await Orr -- including health care costs, pension concessions, privatizing services if necessary and, finally, weighing whether the only real solution is municipal bankruptcy.

"Maybe he means he doesn't have the details of it yet, but I hope he has some idea what the major issues are," Wayne State University law professor Peter Henning said of Orr. "Mr. Orr has to deal with the threat of bankruptcy. This is a more immediate issue and he has to make a decision fairly quickly whether to put the city into bankruptcy or not."

Then he has to match revenue and spending.

"This is the idea of downsizing the city so that the costs more closely match the amount Detroit brings in," Henning said. "On the revenue side, something has to be done to stabilize the tax base. That's all easier said than done and will take years, probably well beyond Mr. Orr's term."

Pamela Amato, a former emergency financial manager for tiny Three Oaks in southwestern Michigan, said when she took the job in 2009, she did not jump straight into the finances. Three Oaks had a $600,000 deficit and was nearly devoid of cash. It took less than a year to turn the village around. Amato says listening to officials and residents was the key.

   1 2  -  Next page  >>