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Detroit Bankruptcy Filing Was Unavoidable, Emergency Manager Kevyn Orr Testifies During Trial

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KEVYN ORR
Detroit Emergency Manager Kevyn Orr is seen during an interview at the Detroit Economic Club luncheon in Detroit, Thursday, Oct. 3, 2013. Christie's auction house will finish its initial assessment of 66,000 art pieces at the Detroit Institute of Arts this month, Orr said, defending their possible sale in Detroit's bankruptcy process. (AP Photo/Carlos Osorio) | AP

DETROIT -- DETROIT (AP) — Detroit's emergency manager testified Monday that he had thought as late as June that a bankruptcy filing could be avoided but that he knew time was running out for the city and its creditors to agree to concessions.

Testifying on the fourth day of a trial to determine whether Detroit is eligible to fix its finances in bankruptcy court, emergency manager Kevyn Orr said he received a couple of counter-proposals from creditors, but none from unions or retirees before filing for bankruptcy protection in July.

"Anyone paying attention knew the time had come to make some very difficult decisions," Orr said of a June meeting with hundreds of the city's creditors. "We were in a financial emergency and were going to have to move very quickly."

Detroit must show it is broke and tried in good faith to negotiate with creditors. Attorneys who oppose the filing seeking the largest municipal bankruptcy protection in U.S. history have tried to build a case that bankruptcy was a predetermined course or inevitable outcome.

Orr said Friday that filing for bankruptcy wasn't a condition of his employment. He is expected to be grilled by attorneys representing unions and pension funds, who say the city didn't hold genuine talks and therefore the case should be thrown out.

He said Monday that after he took the job he saw firsthand the high crime, blight and deplorable conditions of police equipment and facilities in Detroit.

"I knew things were bad," Orr testified. "It was somewhat shocking ... just how dire it was."

Orr, a bankruptcy expert who represented automaker Chrysler LLC during its successful restructuring, has said the city is saddled with $18 billion in long-term debt. He and Police Chief James Craig both have testified about the city's dire straits.

"Detroit spends more than it takes in. It is clearly insolvent on a cash-flow basis," Orr testified as he read from a report he issued in spring after 45 days as emergency manager.

Republican Gov. Rick Snyder also is expected to testify Monday. The trial could end next week, but a decision on Detroit's eligibility appears to be several more weeks away. The judge has set a Nov. 13 deadline for lawyers to file legal briefs on certain issues.

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