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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.”

The Detroit Institute of Arts is prepared to sue to prevent the sale of its collection if Detroit's plan for exiting bankruptcy is not approved, the museum's chief operating officer told the bankruptcy court yesterday, Reuters reported. When Detroit filed for the largest-ever U.S. municipal bankruptcy 14 months ago, the museum began preparing for possible litigation to keep its art works from being sold to pay city creditors, museum COO Annmarie Erickson told the court. Some city creditors have contended that the art is a city asset that can be sold or monetized to enhance payouts to creditors. The Detroit Institute of Arts and Michigan's attorney general have countered that the collection cannot be legally sold to satisfy the city's debts. In January, court mediators brokered a deal known as the "grand bargain" which led to pledges from foundations, the art museum and the state of Michigan to raise more than $800 million over 20 years to ease cuts to city pensions. In return, the museum's assets would be held by a perpetual charitable trust.

The Michigan Strategic Fund board gave final approval yesterday for the sale of up to $450 million of 30-year revenue bonds for a downtown Detroit arena that will be home to the National Hockey League's Detroit Red Wings, Reuters reported yesterday. The financing plan calls for $250 million of tax-exempt bonds backed by increases in tax collections on real estate and personal property from the development. The bonds will be priced through underwriter Merrill Lynch. Another $200 million of variable-rate taxable bonds backed by arena concession fee payments will be privately placed with Comerica Bank. The Detroit Downtown Development Authority, which will own the arena, will hedge interest rate risk on the bonds through a swap agreement with a yet-to-be named counterparty.

Bankruptcy Judge Steven Rhodes ruled yesterday that an expert witness that he picked will testify on the feasibility of Detroit’s debt adjustment plan without restrictions, Reuters reported yesterday. Judge Rhodes said that Martha Kopacz, a senior managing director at Phoenix Management Services in Boston, is qualified to give her expert opinion, noting that her "specialized knowledge will help the court to understand the evidence and to determine whether the city's plan of adjustment is feasible." Detroit's Police and Fire Retirement System and General Retirement System had filed a motion to exclude Kopacz's testimony relating to the pension systems, contending that she lacks qualifications on those matters and testifying about the pension funds was beyond the scope of her appointment. In the wake of Monday's evidentiary hearing that put Kopacz on the stand for questioning, Rhodes concluded that her opinions are based on sufficient facts or data and are the product of reliable principles and methods. Judge Rhodes added that Kopacz will also address whether the assumptions supporting the city's cash-flow projections, as well as revenue, expense and plan payment forecasts are reasonable.

The cost of Detroit's historic bankruptcy has reached $126 million and counting, surpassing the bills the big automakers faced when they were in similar straits, the Wall Street Journal reported on Saturday. An internal report on fees to outside advisers shows costs have roughly grown by four times since December when the city reported the total bill at nearly $28 million. The city's leading law firm on the case already has charged $47 million. City officials describe the nation's largest municipal bankruptcy case as entering its final phase with the hope of exiting by year's end. The trial phase of the bankruptcy is under way and expected to stretch into October.

With key players in Detroit's historic bankruptcy case locked in marathon mediation sessions, the pressure is on bond insurer Financial Guaranty Insurance Co., the last major holdout creditor, to settle with the city, Reuters reported on Friday. Judicial mediator Gerald Rosen has ordered the city and some of its major creditors including FGIC to keep talking until they come to an agreement. Another deadline looms outside of the court process: Kevyn Orr, the city's emergency manager, is expected to end his term on Sept. 29. Detroit's surprise settlement earlier this week with the other major bond insurer, Syncora Guarantee Inc., in addition to prior deals with pension funds, unions, retirees and some bondholders could mean FGIC may have missed its opportunity to recoup a significant portion of the $1.1 billion it has on the line from insuring Detroit debt. Syncora, which pegs its claim at about $400 million, worked out a three-part deal involving city-owned land and contracts. As part of the agreement, Syncora's lease of the Detroit part of a tunnel connecting to Canadian town Windsor would be extended, the company would reap most of a public parking garage's revenue, and a Syncora subsidiary could gain ownership of six downtown lots to develop. There is no valuation of the insurer's recovery from those assets.