Kevyn Orr, Detroit's emergency financial manager within the next 10 days, speaks plainly.
A Washington lawyer with deep experience in bankruptcy and restructuring, he says he wants to be "consensual," which City Council-in-opposition may like to hear even if most of its members probably won't believe it. He says he wants to negotiate in "good faith" with creditors, pension funds and unions, even if good faith may be in the eye of the beholder.
But if a city facing the increasingly real prospect of Chapter 9 bankruptcy falls short under his consensual and good faith efforts, he sounds unafraid to wield a big hammer and initiate what would be the largest municipal bankruptcy in American history. The move would be as defining for this beleaguered city and its legacy as it would be ignominious.
If there was a subtext to Orr's introduction Thursday by Gov. Rick Snyder, it was the declaration that financial reality finally has arrived in the city of Detroit. Time to stop endless bickering, to work together and to focus on reaching solutions quickly because this guy isn't afraid of bankruptcy.
"People of good faith — don't make me go to bankruptcy court," Orr said, flanked by the governor and Mayor Dave Bing. "You won't enjoy it."
No one will, save the Schadenfreude brigade reveling in Detroit's painful reckoning and the army of bankruptcy lawyers who would reap millions in fees for executing the restructuring successive mayors and councils have been unable or unwilling to do.
Orr's appointment culminates the long, downward arc of failure for Detroit's political class and its meager attempts to manage its eroding tax base, declining population and the financial implications they deliver, brutally. You could see the accumulated burden in the face of the mayor, standing stoically beside a governor finally calling the Detroit question.
"The financial crisis did not start four years ago," Bing said, looking weary but sounding magnanimous. "It was out of neglect over 40 or 50 years. The bottom line is we must stop fighting each other. We must start working together. Our citizens must get more than they are getting."
He's right. But working together requires common understanding of reality, options and the facts underpinning them. From cash-flow estimates to revenue collection, police staffing to service delivery, debt loads to pension funding assumptions, there are conflicting opinions of what is true and accurate and what isn't.
All of it, and more, will land on Orr's desk, wherever it ends up being. His job will be, as he said, to confront "the data," use it to inform his decision-making and to guide his actions.
Case in point: A study commissioned by the city of its two main pension funds and its retiree health-care liabilities shows dramatic funding shortfalls that could, if corroborated in the coming months, have profound financial implications for the city and the likelihood — or not — of bankruptcy.
For the year ended June, 30, 2010, the report by Seattle-based Milliman says the adjusted pension fund for city's Police and Fire Retirement System is only 50 percent funded. But the fund's actuarial report shows the system funded at 102 percent that year — and its preliminary funding level for the most recent year is expected to be 96.1 percent, said Matthew Gnatek, chairman of police and fire pension fund.
The veteran of Jones Day, the venerable law firm, will face myriad cross-currents of intrigue and obfuscation, mistrust and animosity, cooperation and encouragement. Orr will be expected to post early and visible results on his three priorities — improving service delivery, making retiree and employee benefits sustainable and managing the city's debt levels.
Most importantly, he will be judged on what he does, not what he says. For every Detroiter protesting Orr's appointment in front of Cadillac Place, there are probably dozens more who just want solutions they can see and feel. They want the lights to work, the police to come when called, the trash to be picked up, and the people who can't get any of it done to get out of the way.
"The community is ready to get this thing fixed," said Bill Pickard, chairman of Detroit-based Global Automotive Alliance Inc. "Whether it takes three months, six months or 17 months, the community is ready to get this fixed."
Less than four years ago, Orr was a leader of the Jones Day team that took Chrysler LLC into federally induced bankruptcy and emerged 42 days later to an uncertain future under foreign control. Now he's accepting a larger challenge that will validate his gambit or consume his career.
"I'm all in," he said. "If we can do this, I will have participated in one of the greatest turnarounds in American history."
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Daniel Howes’ column runs Tuesdays, Thursdays and Fridays
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See Also
- Detroit’s EM: ‘This is the Olympics of restructuring’
- Conservative leader blames unions, liberals for appointment of Detroit 'dictator'
- More protests in store, leader of freeway slowdowns says
- U-M alum Orr answered ‘call to action’ to turn around Detroit
- Detroit emergency manager decision could be politically risky for Snyder
- Pro and con, Detroiters react passionately to EM appointment
- Events leading to Detroit’s EM appointment
- Editorial: Orr is a solid choice for Detroit
More Daniel Howes
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- Penske, Grand Prix back on track
- Howes: Mayor Bing’s Detroit successes mixed
- Detroit 3 progress heralds ‘new day’
- Howes: Detroit potshots too close to reality
- Detroit’s per capita spending on police and fire is out of step
- Record profit in N. America puts ‘growth’ back in Ford’s vocabulary
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