Detroit may use water department funds to pay pension debts, Orr says

DETROIT Wed Sep 18, 2013 6:40pm EDT

Detroit's Emergency Manager Kevyn Orr talks with Reuters during an interview in Detroit, Michigan August 7, 2013. REUTERS/Rebecca Cook

Detroit's Emergency Manager Kevyn Orr talks with Reuters during an interview in Detroit, Michigan August 7, 2013.

Credit: Reuters/Rebecca Cook

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DETROIT (Reuters) - Detroit is considering tapping into some of the $1.2 billion in water and sewer revenue earmarked for repairs and instead apply it to city pension or healthcare costs, the city's emergency manager has said in a court proceeding.

"I didn't say we would take any capital; I said we will - we would - consider it," Detroit Emergency Manager Kevyn Orr said in response to a line of questioning in a sworn deposition on Monday.

Orr would not offer details about any planned alternative uses for funds currently slated for upgrades to the water and sewage department. But he acknowledged there likely are restrictions on the use of water and sewer revenues based on promises Detroit made when selling more than $5 billion in water and sewer revenue bonds.

A 516-page transcript of Orr's testimony was included in a filing with the bankruptcy court on Wednesday.

Orr's spokesman, Bill Nowling, declined to comment on the testimony.

Detroit's Water and Sewage Department provides water service to the city and eight suburban counties that account for 40 percent of Michigan's population.

In a June 14 proposal to the city's creditors, Orr said he hoped to spin off the water and sewer services into an independent authority.

Detroit, which is struggling under an estimated debt load of more than $18 billion, filed the largest-ever U.S. municipal bankruptcy in July. Orr was questioned Monday by attorneys representing city unions and retirees who are trying to prove the city is not eligible for protection from creditors under U.S. bankruptcy law.

Roughly half of Detroit's liabilities stem from retirement benefits, including $5.7 billion in liabilities for healthcare and other retiree benefits and a $3.5 billion pension liability.

Orr has said city workers and retiree could face reductions in pensions and health benefits. Attorneys spent most of the deposition asking Orr about whether Michigan's state Constitution prohibits him from reducing pension benefits.

Anthony Ullman, an attorney for the committee representing the city retirees, grilled Orr about potential assets the city could monetize, including the water and sewage department, the Municipal Parking Department and the Detroit Institute of Arts.

The city owns the DIA's 60,000-piece collection and discussion of potentially selling some of the pieces to pay the city's debt has been one of the most publicized issues in the bankruptcy proceedings. Christie's was hired to appraise part of the museum's collection, but Orr said the auction house has not yet delivered an appraised value.

In the testimony, Orr said there have been general discussions of finding other ways to monetize the works, including leasing some art. Orr said there was preliminary discussion of a potential $1 million lease payment, but stated he could not estimate the potential revenue stream more precisely.

"It's nothing substantive ... I think I had a discussion with one of the representatives at Christie's that was, generally speaking leasing is a very difficult thing to do," Orr said in the testimony. "That's the nature of the discussion that you would have to have the right pieces at the right time at the right market to generate cash."

Attorneys were also focused on communication between the emergency manager's office and state officials prior to the city's bankruptcy filing.

At the behest of city lawyers, Orr refused to answer questions about any communication with the state. The Detroit chapter of the American Federation of State, County and Municipal Employees filed a request with the court Wednesday to force Orr and other witnesses to testify on communications from before the filing.

The transcript from Orr's deposition was included as part of the filing. Bankruptcy court Steven Rhodes has scheduled a hearing for Thursday on a request by the American Federation of State County and Municipal Employees to compel Orr to testify about communications between the city and the state of Michigan prior to Detroit's July 18 bankruptcy filing.

(Reporting by Joseph Lichterman; editing by David Greising, G Crosse)

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Comments (1)
morbas wrote:
The GOP trick of read my lips, no new taxes. The mean tax level is above 30% across the board. To include all posible 51 taxes you have potential 60% tax rates for above average income earner. So Orr is hiding another tax in the department of Water costs.
Join me in a fight to unify the tax code, here is the pitch based on published income datum. The rich can run but not hide (for long).

To: Office of Senator ____________________
United States Senate Washington,
D.C. 20510

To: Office of Representative_________________________
U.S. House of Representatives
Washington, DC 20515

We the people of this United States do proclaim this federal government ‘of, by and for the people’. That, in order to fairly distribute revenue burden, to satisfy ‘net income’ progressive taxation, to balance all governments budgets, and to not tax poverty;
The people mandate:
Income National Tax code that shall use margin graduated income tax principle: Margin $30k 0% single, $60K 0% joint, income above this a linear increasing rate {Income-[$30k or $60k])*(Income/$800k)*90%; 90% limit} . Exemptions shall be prohibited. The Federal Reserve shall amend the (90%) rate, and control currency printing mandated to maintaining currency availability and value. The Federal Reserve shall set the Margin rate value well (>2x) above highest of all State Poverty Level(s). Revenue shall be proportioned 1/3rd Federal,1/3rd State proportioned per cast ballot and 1/3rd Local proportioned per cast ballot.
This National Tax is a peoples tax, no other citizen taxation shall be permitted. Business shall not be taxed. The Federal Reserve shall control taxation. The people will by simple majority approve or reject all margin and rate changes at every Congressional House Representative election year ballot.

Sep 18, 2013 7:46pm EDT  --  Report as abuse
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