Kevyn Orr, Detroit's state-appointed emergency manager, defended a decision to keep valuable art off the auction block, telling a judge on Friday that it would greatly harm a city museum and cause turmoil in the community, especially among powerful, wealthy patrons, the Associated Press reported on Friday. "A one-time sale is detrimental to the long-term benefit of the city," Orr said. "Selling any art would cause a maelstrom." The Detroit Institute of Arts holds many pieces that were acquired by the city. But no art will be sold in a deal that protects the museum and raises hundreds of millions of dollars from the state, foundations and philanthropists, solely for city pensioners whose benefits would be cut in bankruptcy.
Kevyn Orr, the emergency manager shepherding Detroit through its record municipal bankruptcy, told a judge about the tough situation Michigan’s biggest city faced when he was asked to help get its house back in order, Bloomberg News reported yesterday. Core services were “substandard” and finances were in “dire straits,” Orr, testified yesterday in Detroit federal court, where a bankruptcy judge is weighing whether the city’s plan to eliminate $7 billion in debt is feasible and fair. Orr was given sweeping authority over Detroit’s finances and government in 2013, when Governor Rick Snyder appointed him to help the city reduce $18 billion in debt. Previously, Orr was a partner at the Jones Day law firm, which is now helping Detroit through the debt-adjustment process. Union lawyers initially attacked Orr’s decision to put Detroit into chapter 9 bankruptcy in July 2013. They accused him and Jones Day of conspiring with Snyder to drive the city into a filing without considering alternatives. Since then, mediation has produced agreements with most major creditor groups. Orr said he was “amazed that we reached some of the settlements we did” and that most wouldn’t have happened without mediation, which was led by Gerald Rosen, the chief federal judge in Detroit.
A Detroit consultant said yesterday that the city should be able to access capital markets and borrow at a rate of around 5 percent after it exits bankruptcy, as long as its tax revenue remains stable, Reuters reported yesterday. But even as Kenneth Buckfire, president of restructuring firm Miller Buckfire & Co., testified about the factors that will help Detroit woo investors, he said that the city will have to educate the municipal bond market about the "New Detroit," once it exits the largest-ever municipal bankruptcy. Buckfire, in testimony in U.S. Bankruptcy Court, said that the markets will respond well to Detroit's paring of its liabilities from $10 billion to $3 billion, 10-year cost certainties, and post-bankruptcy oversight. Bankruptcy Judge Steven Rhodes is currently conducting a hearing to determine the fairness and feasibility of Detroit's bankruptcy plan, part of which includes a $325 million exit facility financed through Barclays. http://www.reuters.com/article/2014/09/30/usa-detroit-bankruptcy-borrow…
In related news, Detroit lost more than 1 million residents and three-quarters of its retail businesses on its way to bankruptcy, and now Comcast Corp. also wants leave, Bloomberg News reported today. The largest U.S. cable-television company says it will shed 2.5 million customers in Detroit and other Midwestern and Southern communities as part of a plan to buy No. 2 Time Warner Cable Inc. Relinquishing the markets will help keep Comcast’s market share below 30 percent of U.S. pay-TV homes — a level that regulators once set as a limit and Comcast has volunteered to honor. As it drops Detroit, Comcast would gain the nation’s top two markets, New York and Los Angeles. The $45.2 billion acquisition would enlarge Comcast by 7 million video customers. The castaways in Detroit, Minneapolis and elsewhere would belong to a new company, GreatLand Connections Inc., to be created in what the companies call a tax-efficient spinoff. The new company’s debt would exceed industry averages — something that has raised concerns about service in those communities. http://www.bloomberg.com/news/print/2014-10-01/comcast-to-follow-1-mill…
Bankruptcy Judge Steven Rhodes ruled yesterday that Detroit can continue shutting off water service to non-paying customers, saying his court does not have jurisdiction over the issue and that suspending disconnections for six months could hurt the city's finances, Reuters reported yesterday. "Detroit cannot afford any revenue slippages," Judge Rhodes said, before resuming his ongoing hearing on Detroit's plan to exit municipal bankruptcy. Detroit's bankruptcy plan includes a $4.5 million water affordability fund and a cap on rate increases. It also creates a regional water authority, which Judge Rhodes said could be put in jeopardy by a revenue drop from unpaid bills. Residents and political activists had asked Judge Rhodes for a six-month restraining order against the shutoffs. Last week, during a break in the bankruptcy hearing, Judge Rhodes heard arguments about the financial and social impacts of cutting off the water of hundreds of homes each day.
A Michigan state panel on Friday approved four bond deals worth up to $1.1 billion which are needed for the city of Detroit to emerge from bankruptcy, plus the sale of city-owned land parcels needed for a new public bridge to Canada, the Lansing State Journal reported on Saturday. The Detroit City Council had previously approved the bond deals, which will be used to pay off various creditors who have agreed to the city’s latest plan of adjustment in bankruptcy, provide bankruptcy exit financing, and set aside money for creditors’ claims that are still disputed. The City Council had proposed an alternate plan for the $1.4-million sale to the Land Bank Fast Track Authority of 301 city-owned properties near the site of the proposed New International Trade Crossing. But the City Council essentially withdrew that alternative proposal on Thursday, conceding in a letter from Detroit Corporation Counsel Melvin “Butch” Hollowell that their plan was not currently viable. Although the Michigan Local Emergency Financial Assistance Loan Board — which consists of three state officials appointed by the governor — must approve the bond deals, it is the city, not the state, which is on the hook for paying off the bonds.
The Detroit City Council unanimously approved a resolution yesterday that would keep a state-appointed emergency manager in control of the city's historic bankruptcy case, while returning city governing powers to elected officials, Reuters reported yesterday. Shortly after the vote, Mayor Mike Duggan signed a letter, informing Michigan Governor Rick Snyder of his approval of the action, which followed three days of closed-door meetings. Kevyn Orr, who was chosen by Snyder in March 2013 for an 18-month appointment as emergency manager, will maintain responsibility for the city's historic bankruptcy in order to "successfully achieve confirmation and implementation" of Detroit's plan to adjust $18 billion of debt and obligations, according to the resolution. Orr yesterday also signed an order reflecting the new delegation of powers. "There was so much work done before I even got here that I view this as just a bridge and the close-out of a process that started a year and a half before I came," Orr said after the signing. "We'll know where we are a year or two from now, and whether it was worth it." City officials also said that Orr had to be retained as emergency manager to satisfy a condition of a $120 million loan from Barclays that required Detroit to have an emergency manager until the loan is retired. Detroit last month said Barclays agreed to raise up to $275 million to fund its bankruptcy exit, with part earmarked to retire the previous loan.
Kevyn Orr will end his 18-month term as Detroit's emergency manager this week, leaving a city still mired in operational and fiscal uncertainty and arguing in court for approval of its bankruptcy plan, Reuters reported today. His widely anticipated removal by Detroit Mayor Mike Duggan and the nine-member city council — which could happen as soon as Thursday — would be the first ouster of an emergency manager under a 2012 Michigan law. The city's elected leaders have made it clear that they want their powers back once the clock stops ticking. Orr is expected to continue as an outside adviser to the city, but his departure from the post and Detroit's speedy run through the bankruptcy court so far are turning attention to Michigan's emergency manager law. http://www.reuters.com/article/2014/09/25/usa-detroit-bankruptcy-orr-id…
In a related Bloomberg analysis, the practical need for Detroit Emergency Manager Kevyn Orr to conclude the city’s journey through chapter 9 protection may trump elected leaders’ opposition to state control, Bloomberg News reported yesterday. The council may vote this week on a revised role for Orr, though Michigan law allows members to remove him entirely after he marks 18 months in office Sept. 27. With five new members on the nine-person council, the council displays a more civil and cooperative tone, said former member Sheila Cockrel. “This is a profoundly different council,” said Cockrel, who teaches about city politics at Wayne State University in Detroit. She pointed out that Mayor Mike Duggan and his staff attended a recent council retreat outside Detroit, a collegial meeting of the two government branches unheard of in the past 20 years. The decision on Orr will reveal the council’s temperament and its relationship with Duggan, Detroit’s first white mayor since 1973, to whom Orr has given control over much of the government of the city, which is 83 percent black. http://www.bloomberg.com/news/print/2014-09-24/orr-is-object-of-desire-…
Bankruptcy Judge Steven Rhodes yesterday heard testimony from low-income families in Detroit who say they suffered hardships when the city cut off their water with no warning and are suing to prevent such shutoffs from happening again, Reuters reported yesterday. Judge Rhodes is hearing arguments through today before deciding whether to issue a six-month injunction against water cutoffs. The larger hearing to approve Detroit's plan for exiting bankruptcy is on hold for the week and will reconvene on Sept. 29. Nearly 20,000 Detroit residents lost access to water and sewers this summer, sparking protests and leading the mayor to issue a month-long moratorium on shutoffs as well as requirements that the water department post warnings on people's doors about the risk of losing water access.
The Detroit City Council on Friday approved the creation of a regional water authority, pushing forward an integral part of the city's plan to exit the biggest-ever municipal bankruptcy, Reuters reported on Friday. A deal Detroit reached last week with Oakland, Wayne and Macomb counties creates a regional water and sewer authority, but allows Detroit to maintain control of its local system. The authority must now be approved by at least one of the counties. The city's water and sewerage department had become a sticking point in the plan to restructure Detroit's $18 billion of debt and other obligations.
Investing in Detroit, Warren Buffett said yesterday, is an increasingly appealing proposition, and will be “much better after the bankruptcy than before,” Fortune Magazine reported today. In part, that’s because the city’s finances were clearly unsustainable before now, and no one wants to invest in a place that’s headed for chapter 9. But Buffett added that the city is going to be “employing a lot more people five years from now or 10 years from now,” than it does today. “You don’t do it without cost,” Buffett said of the bankruptcy. “But it was important that Detroit cleared the slate, and it looks to me like they’re doing it promptly.”
