Kevyn Orr (John T. Greilick / The Detroit News)
Detroit’s pensioners aren’t the only people objecting to Kevyn Orr’s harsh prescription for what ails the bankrupt city.
The chairman of the state Senate Appropriations committee, a Republican, calls the emergency manager’s plan to make Belle Isle a state park “dubious.” The Detroit Institute of Arts wants the state (i.e., Michigan taxpayers) to contribute millions to the city’s workout on behalf of the museum.
Pensioners and public-sector unions want an insolvent city to honor obligations it demonstrably cannot afford, now or in the foreseeable future. Bondholders happy to reap fat yields from Detroit debt now demand the city honor its “full faith and credit” pledge when there’s no such thing in bankruptcy.
Mayor Dave Bing complains that Orr, a bankruptcy lawyer, is bungling city operations and frustrating his department heads. Really? As if City Hall under the former NBA great purred with teamwork, political savvy and bureaucratic efficiency.
Even business leaders theoretically supportive of the historic Chapter 9 are privately squeamish about bankruptcy’s collateral damage, chiefly because the concessions the process aims to impose through the court on everyday city workers and retirees are so comparatively harsh.
“If you cut their pension dollars too much, what are they going to do to live?” asks a prominent CEO active in political issues. “It’s all about the numbers, but the numbers have consequences.”
Yes, they do. But this is bankruptcy, as U.S. Bankruptcy Judge Steven Rhodes’ questioning this week is reminding union and pension lawyers (and their clients), and the status quo does not survive bankruptcy. This is what too many warned for too long would happen absent a serious, fact-based restructuring that otherwise would not have materialized before Team Orr did.
Detroit’s status quo failed. The city couldn’t maintain Belle Isle, and couldn’t operate a world-class museum whose management it outsourced even as the city imperiled its collection to save it. It couldn’t make required contributions to pension plans overseen by ethically challenged boards, and it couldn’t manage its books, its cash flow, its departments and so much more.
It couldn’t, in plain English, do what needed to be done to a) widely recognize its dire financial predicament so that it could b) begin a methodical process to restructure its balance sheet, rationalize its operations and improve its service delivery.
Pretending otherwise, as do terminal skeptics of Orr, the emergency manager law and the bankruptcy filing, is absurd. That confuses suspicion and ideological zeal with generally accepted management principles and a long historical record of miserable performance.
It is, of course, understandable that such endangered constituencies as unions and pensions, bondholders and insurers, are standing astride Judge Rhodes’ courtroom yelling stop. If past (and, to some extent, current) behavior is any predictor of the future, how would Rhodes booting the city’s Chapter 9 petition yield a different result?
It wouldn’t, at least not in the real world. The interests asking Rhodes to kick the nation’s largest municipal bankruptcy out of court want to turn the calendar back to a time when, what, the city flouted its consent agreement with the state Treasury Department and union leaders insisted no financial crisis existed in Detroit?
But there is a crisis, and it’s as obvious to average Detroiters as it is to camera crews from “60 Minutes” harvesting B-roll from the city’s dilapidation. It’s obvious to credit ratings agencies, municipal analysts, police officers and firefighters struggling to do their jobs with substandard equipment and shrunken payrolls.
Yes, I know: Judge Rhodes has yet to decide whether Detroit is eligible for bankruptcy, even though the petition will be three months old Friday. He’s yet to rule whether the state constitution really does protect the vested pension benefits of public-sector employees under federal law.
The court has yet to consider a “plan of adjustment” from Orr and his team that actually proposes to cut pensions. The court has yet to be asked to confirm a plan that would sell pieces of the DIA’s city-owned collection to raise cash, or would jettison departments and services (such as they are) that define the city bureaucracy and the people who work for it.
However successful the arguments advanced by unions, pensioners and others, none of it alters the conditions that precipitated Detroit’s bankruptcy filing — or the need for a sustainable workout that changes the status quo, for good.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.