July 30, 2014 at 10:48 am

Detroit drops proposal for bankruptcy 'plan monitor'

The city dropped plans late Tuesday to install a court-appointed official to oversee compliance with Emergency Manager Kevyn Orr's plan to shed more than $7 billion in debt.

The so-called “plan monitor” was eliminated from an updated version of Detroit’s debt-cutting plan filed Tuesday in bankruptcy court. The position was scrubbed because it was unnecessarily given financial oversight and other provisions included in legislation governing the “grand bargain” — a $660.8 million plan to soften pension cuts and shield the Detroit Institute of Arts collection from creditors.

“After discussing it with the mayor and with the state of Michigan, the emergency manager (Kevyn Orr) determined such a monitor would have been superfluous to the financial oversight and reporting requirements already required as part of the 'Grand Bargain' legislation that was signed into law,” city spokesman Bill Nowling said Wednesday. “The plan monitor idea came from discussions that occurred before the Grand Bargain legislation passed.”

The move came five days after the city’s bankruptcy team first publicly revealed the proposal, which would have left Detroit under prolonged and apparently unprecedented court oversight.

The plan monitor idea was a response to concerns raised by U.S. Bankruptcy Judge Steven Rhodes. The post-bankruptcy monitoring proposal was included originally to give Rhodes an option for long-term oversight.

The monitor, appointed by Rhodes, would have filed quarterly reports with the court and have power to subpoena records and answers from the mayor, City Council, pension fund trustees and officials overseeing health-care trusts.

Orr's legal team proposed the monitor as being a neutral expert skilled in restructuring, accounting, municipal finance and budgeting, preferably for municipalities with "annual revenues of $250 million or more," according to the filing.

Several types were excluded from consideration: "The plan monitor shall not be an appointed or elected official of any governmental unit currently serving in such capacity and shall not be a former appointed or elected official of the city or the state."

That would seemingly eliminate Orr, a Washington, D.C., bankruptcy expert, who was appointed by Gov. Rick Snyder in March 2013 to takeover the city.

Aside from the monitor, city officials also would be under the scrutiny of a new nine-member Financial Review Commission the Legislature established last month as a string attached to $195 million in state aid for city pensions.

The commission, which will be dominated by state government appointees, will have veto power over city contracts exceeding $750,000 and could remain active for at least the first three years after Detroit exits bankruptcy. Under the new oversight law, if Detroit can meet certain financial benchmarks, the commission would go away after a 10-year period of dormancy.