May 13 Detroit's emergency manager told a
special committee of Michigan lawmakers on Tuesday that without
state money, the city could be pushed back to "the starting gate
of the bankruptcy process."
Kevyn Orr, a former bankruptcy attorney who was tapped in
March 2013 by state officials to run Detroit, said the state
money was essential for the city's debt adjustment plan, which
aims to ease pension cuts and protect works at the Detroit
Institute of Arts from being sold to pay city creditors.
The state's $195 million lump sum contribution, along with
$366 million pledged by philanthropic foundations and $100
million by the Institute, would be tapped for city worker
Without all of that money, pension cuts would be larger and
litigation challenging those cuts would drag on, derailing hopes
of wrapping up the city's historic bankruptcy by early
September, Orr said.
"We have an ambitious schedule. We have what we think is a
reasonable plan. But to put it bluntly, we need your money," Orr
told the committee on Detroit's Recovery and Michigan's Future
in the Michigan House of Representatives.
U.S. Bankruptcy Judge Steven Rhodes will begin on July 24 a
confirmation hearing on Detroit's plan to adjust $18 billion of
debt and exit the biggest municipal bankruptcy in U.S. history.
The judge must ultimately determine if the plan is fair and
Orr said the money from the state, the foundations and the
art museum has to be in place by the time ballots for voting on
the plan, which were mailed on Monday to thousands of city
creditors, including retirees and current workers, are returned
by July 11. The three Detroit automakers said on Tuesday they
were mulling a request by the museum to help raise its $100
million share of the deal.
Michigan would take the nearly $195 million out of its rainy
day fund, paying it back over 20 years with proceeds from the
state's share of a national settlement with U.S. tobacco
An 11-bill package introduced in the House last week also
creates a seven-member commission to oversee the city's
finances, modeled after one put into place following New York
City's fiscal crisis in the 1970s.
Orr said some parts of the legislation will have to be
tweaked to reflect settlements the city has with its two pension
funds, some unions and other groups.
Committee Chair John Walsh, a Republican, said that by
providing the money to Detroit pensions now, Michigan could
prevent paying much more later if bigger pension cuts force some
city retirees to seek state assistance. The committee has
scheduled additional hearings on the legislation for Wednesday
(Reporting by Karen Pierog; Editing by Dan Grebler)