DETROIT -- Detroit Emergency Manager Kevyn Orr and Michigan Governor Rick Snyder defended their historic decision to send the city of Detroit to bankruptcy court on Friday morning, saying the decision would stabilize the troubled city once and for all.
"We simply cannot kick the can down the road any further," Orr told reporters during a press conference held in Detroit. He cited the City of Detroit's decision to borrow $1.5 billion in 2005 to help pay for pension obligations (they later defaulted on that loan and pledged casino revenues to pay back the amount) as the beginning of Detroit's march toward bankruptcy court.
On Thursday, the City of Detroit filed for bankruptcy, the largest city to go broke in America's history. Orr wrote in a recommendation for bankruptcy on Tuesday that "no reasonable alternative exists to rectifying the City's financial emergency." The long-feared specter of bankruptcy raises fears of losing more jobs in city government, selling off the Motor City's prized assets, and further deterioration of public spaces and services to its residents.
Orr, a restructuring expert, defended his decision to file for bankruptcy, calling it the best chance Detroit has to "deal with 60 years of deferred maintenance in 15 months."
"I'd be happy to listen to any other plan somebody has come up with," he said, "given the restraints that we're under."
Detroit's long-term structural debt, which includes costs like the region's water department, pensions to retired and active workers, bonds and the yearly budget, is estimated to have soared to over 18 billion dollars. Despite negotiating with creditors and other parties who hold Detroit's debt, Orr wrote that "the overall inability or failure of many stakeholders to respond to the negotiations" has left Detroit unable to pare down its financial obligations without the help of a bankruptcy judge.
Orr says that Detroit's path through bankruptcy could take little more than a year, estimating that the city could emerge from Chapter 9 bankruptcy by early fall of 2014. If Judge Alice Batchelder, chief justice for the U.S. Sixth Court of Appeals, decides to appoint a judge to approve Detroit's bankruptcy petition, that justice may well use Orr's restructuring plan as a basis for deciding which creditors will be paid -- although the 48 unsecured creditors' hopes for full payment look exceedingly dim. Retired and active workers may also see serious hits to their pensions.
He contended that he had operated in good faith with those creditors, arguing that, with less than 18 months to turn around the city of Detroit as emergency manager, he had acted swiftly and with urgency.
"Your decision instead of coming to the table with me is to continue to file suits against me," he shot back to a reporter. "Who's not operating in good faith?"
Orr said they were trying to be "fair" to the city's retirees and pension funds, which sued him Wednesday to block a bankruptcy filing. He noted they were asking the courts to appoint a representative for the city's retirees, although that amounts to Orr basically asking for another "opponent" in court.
Orr said bankruptcy would also temporarily halt the stream of lawsuits filed against the city.
“Bankruptcy gives us breathing room," he contended. "We were being sued on almost a weekly basis. I pleaded for that not to happen.”
Snyder, who approved Orr's petition for bankruptcy, has blasted city leadership past and present for their part in failing to control Detroit's spiraling costs or provide services to the city's 770,000 residents, who pay the state's highest taxes. The budget deficit just for this year totals $380 million, yet the Detroit of 2013 is a city of broken-down ambulances that can't afford to be fixed and streetlights that have gone dark for decades. Homicides rose nine percent in 2012, yet less than eight percent of crimes reported are ever solved by the Detroit Police Department. Every city department has seen layoffs and buyouts in recent years.
"This decision comes in the wake of 60 years of decline for the City, a period in which reality was often ignored," he wrote on Wednesday.
Snyder's selection of Orr as emergency manager was controversial in the city of Detroit, with many residents arguing that his appointment robbed citizens of democratically-elected leaders and local control. "A lot of people have been outraged at my appointment," he acknowledged. "I frankly I wish there had been a lot more outrage over the past 10 or 20 years."
But Snyder and Orr both maintained that Detroiters would not see critical services like police and fire responders eliminated during bankruptcy, with Snyder calling the city's residents his "customers."
"To be a great state we need Detroit to be on the path to becoming a great city again," said the governor.
Orr appeared to grow impatient with reporters' questions about the harm bankruptcy could wrought on retirees and the city's 9,700 employees, retorting that the city's 700,000 residents also don't deserve a 55-minute average police response time or endemic blight.
"The doctrine of Chapter 9 is designed to address those questions. ... [It's] skewed that way," Orr argued, "not towards the city, but toward the health, safety and welfare of the citizens, because that's how it should be."
"Does anybody think its okay to have 40-year-old trees growing through the roof of dilapidated houses?" he asked. "Does anyone think our children should walk home from school in the dark of night in October?"
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