By Joseph Lichterman and Bernie Woodall
DETROIT Oct 28 Detroit's emergency manager
painted a picture of a city in dire financial straits in
testimony on Monday, with budgets so strained that bumpers were
falling off police cars, as he laid out the city's case of why a
municipal bankruptcy filing was the only way back to health.
Kevyn Orr, the emergency manager, sparred with a lawyer
representing city retirees in the fourth day of Detroit's
landmark bankruptcy eligibility trial.
Michigan Governor Rick Snyder began to testify Monday
afternoon, a rare court appearance by a sitting governor.
Ahead of Snyder's testimony, about 100 protesters, a handful
carrying signs with photos of Snyder with devil's horns, marched
outside the Theodore Levin United States Courthouse in downtown
Detroit chanting "Hey, hey, ho, ho, Rick Snyder has got to go."
Orr noted that a number of lawsuits were filed in the weeks
before the city filed for bankruptcy on July 18, saying that the
litigation made it clear that city creditors were not willing to
make compromises on reducing Detroit's debt.
"Given the amount of litigation, it was clear to me there
was going to be no other way to pursue a comprehensive and
orderly restructuring of the city's problems in a expeditious
way," Orr said.
In describing the level of Detroit's financial distress and
how that was affecting life in the city, Orr said, "Every
neighborhood, even the good ones, had some degree of blight."
Orr said that Detroit's financial status was "shocking" when
he first took office, saying that no knowledgeable person ever
has disputed his claim that the city is insolvent.
Detroit's public sector unions, retirees and pension funds
have all objected to the city's filing. They say the city
negotiated in bad faith and argue that Michigan's constitution
prevents retiree pensions from being cut. The trial in federal
court is being held to determine if Detroit is eligible for
bankruptcy under Chapter 9 of the federal bankruptcy code.
Monday's morning session featured testy exchanges between
Orr and Anthony Ullman, an attorney who represents a committee
for the city's 23,500 retirees. The dispute between witness and
lawyer ranged from the constitutionality of Orr's actions to his
style of answering questions in court.
Orr said he believes federal law trumps state law when it
comes to pensions in bankruptcy. He was responding to a question
from Ullman about whether Orr was upholding an oath he took to
become emergency manager to protect the Michigan constitution by
proposing the pension cuts.
As the two sparred, Ullman said that Orr was expounding in
his replies when a simple "yes" or "no" would suffice. Orr said
he needed to explain his answers because often the questions
were too complicated for one-word replies.
Orr's testimony was suspended to allow Snyder to testify.
Orr in testimony earlier Monday painted a grim picture of
life in Detroit, from a fire department with faulty equipment to
blighted neighborhoods where school children say they are afraid
of "everything" as they walk to school or their bus stops, at
the start of what could be a pivotal day in the city's
bankruptcy eligibility trial.
Detroit in the proceeding is seeking to prove it is bankrupt
and entitled to protection from creditors under the federal
Chapter 9 municipal bankruptcy law. City unions, pension funds
and retirees are among those opposing Detroit's bankruptcy
petition, the largest-ever municipal bankruptcy filing.
Resuming testimony from late Friday, Orr on Monday said when
he arrived in March, it was clear the city was in dire financial
straits. "I knew things were bad. It was somewhat shocking just
how dire it was," Orr testified.
He added, "No one, on a serious basis, has ever disputed to
me that the city is insolvent."
To be eligible for bankruptcy, Detroit must prove it is
financially insolvent, that it negotiated in good faith with
creditors or there were too many creditors to make negotiation
feasible. It also must establish that it has a desire to
restructure its finances.
Orr said that if the city is not allowed to be restructured
under bankruptcy protection there is a chance that it could
revert to what he called unsustainable path it has been on for
decades, particularly since 2000.
Detroit is some $18.5 billion in debt, which Orr says
includes $3.5 billion in pension debt.
The birthplace of the automotive industry, Detroit was once
the fifth-largest U.S. city, with a population peaking in the
1950s at 1.8 million. Today, the population is under 700,000,
with 25 percent of residents having moved out during the last