| June 27
June 27 Detroit's emergency manager issued a
flurry of announcements on Thursday addressing union contracts,
power distribution and an errant council president as he steps
up the pace of efforts to tackle the city's massive $18.5
billion debt problem.
Kevyn Orr stripped City Council President Charles Pugh of
his authority and pay, terminated two union contracts that were
about to expire so as to allow room to renegotiate them and
announced an agreement with power company DTE Energy Co. to take
over power distribution to local institutions, including the
public school system.
In a statement, Orr said the power distribution operations
of Detroit's Public Lighting Department have run at an average
annual loss of roughly $30 million for the past five years and
that DTE would be better placed to take them over.
"The 100-year-old PLD system has not received any investment
in nearly a decade," Orr said. "Exiting the electric business
and letting a recognized expert such as DTE run it is a sensible
course of action to take."
DTE spokesman Alejandro Bodipo-Memba said the agreement
should result in "significant improvements" for the 115
institutions and businesses affected.
Orr was appointed by Michigan Republican Governor Rick
Snyder to try to tackle Detroit's finances and create a
sustainable model for a city whose population of 700,000 numbers
not much over a third of its peak more than half a century ago.
On June 14 he made a proposal to creditors that would pay
them pennies on the dollar and defaulted on a $39.7 million
payment on certificates of participation. He has said a number
of times that he would like to avoid bankruptcy for Detroit, but
will file for Chapter 9 bankruptcy protection if need be.
Douglas Bernstein, a partner at law firm Plunkett Cooney in
Detroit suburb Bloomfield Hills, said Orr's moves on the union
contract and power distribution were common sense moves.
"Orr is just doing what he needs to do," he said. "He's
checking off the things that need to get done and what he's
doing makes sense."
The emergency manager also announced Thursday that letters
were sent on June 25 to provide notice that contracts with the
American Federation of State, County and Municipal Employees
(AFSCME) and the Detroit Police Lieutenants and Sergeants
Association would be terminated on July 6.
Those contracts were about to expire and under U.S. labor
law, if Orr had failed to terminate them they would have rolled
over for year and he would have been unable to negotiate new
terms until next year.
Edward McNeil, assistant to Albert Garrett, who heads AFSCME
in Michigan, said "this is just standard practice."
"If either side wants to change the terms, this is what you
do," he said.
McNeil said the AFSCME contract in question only affected
911 operators, which account for 100 of the 2,000 employees the
union represents in Detroit.
In his statement Thursday, Orr said it is possible "new
terms could be issued in the future as part of the city's
John Beck, a professor of labor relations at Michigan State
University, said that signaled a willingness to negotiate.
"That is kind of an olive branch and it shows he would like
to talk before he dictates terms," Beck said. "These people are
important to the fabric of the city and you want them on your
side for years to come if you want to succeed."
PUGH'S POWERS, PAY REMOVED
The only move by Orr on Thursday that unrelated to his task
of trying to restructure Detroit's finances was the decision to
strip Charles Pugh of his salary and powers.
Pugh missed the last two council meetings and on Tuesday
said was taking medical leave for up to four weeks.
Orr had ordered Pugh to return to his $77,000-a-year job by
the end of the business day Wednesday or resign.
Calls to Pugh's office were not returned. He disabled his
social media accounts last week.
Pugh will be paid through July 7. He will keep his health
care benefits until he leaves office on Dec. 31 at the end of
Two members of the City Council have also announced plans to
leave after the end of this week. Their departures and Pugh's
loss of authority will bring the council down to six acting
Mayor Dave Bing has announced he will not seek re-election
this year. While Orr's powers as emergency manager mean that he
is the ultimate authority in the city, Bing and the City Council
still run the city day to day. The loss of several members will
make it difficult for the council to conduct business.