Detroit turns to scrapping to fill budget hole
Detroit — City leaders are borrowing a page from scrappers and thieves by selling old copper wire to boost Detroit's finances.
The city will scrap 13 million pounds of copper wire left over by decommissioning the Public Lighting Department, a city consultant testified Tuesday during the Detroit bankruptcy trial.
The copper wire will generate as much as $40 million, though Detroit is conservatively budgeting for $25 million in revenue, city consultant Gaurav Malhotra testified.
The revenue approach emerged during the city's bankruptcy trial, which Tuesday featured testimony from Emergency Manager Kevyn Orr about how Detroit avoided a potentially "catastrophic" outcome by settling with a bond insurer owed $1.1 billion.
The city has fought copper thieves and scrappers for years in hopes of stemming blight, particularly, in city neighborhoods.
The Detroit Police Department created a Copper Theft Task Force about 10 years ago, but the unit was scrapped so the department could put more officers on street patrol.
In April, Gov. Rick Snyder signed into law a scrap metal bill intended to make it harder for thieves to convert stolen items into cash — particularly in Detroit.
Mayor Mike Duggan has made tightened scrap metal regulations a high priority. Detroit is plagued by thieves stripping catalytic converters from vehicles and metal siding, copper wire and fittings from unattended and even occupied buildings.
Under the new law, scrap metal dealers can pay for items worth $25 or more that thieves regularly swipe, such as air conditioners, copper wire and catalytic converters, only by mail to valid addresses provided by the sellers.
Scrap dealers also have to take photos or video of what they buy, according to the law. Sellers must be paid by check, money order, or special cards and receipts they can redeem at on-site automatic teller machines that take photos of them getting the cash.
Detroit is moving away from providing electricity to customers. During the next five to seven years, Detroit will be completely out of the business of supplying power to about 115 large nonresidential customers at 1,400 sites throughout Metro Detroit.
DTE Energy will take on the city's customers, which include the Detroit Public Schools, Joe Louis Arena, Cobo Center and the DIA. DTE will expand its system to handle the extra load, and the lighting department will decommission its equipment.
Earlier Monday, a bankruptcy lawyer revealed a group of hedge funds is expected to sign off on a breakthrough deal between Detroit and a bond insurer, pushing the city a step closer to exiting bankruptcy court.
The funds' lawyer, Thomas Moers Mayer, told U.S. Bankruptcy Judge Steven Rhodes Tuesday that he expects the financial creditors will approve the deal by Thursday.
The hedge funds are owed $1 billion and would split $141 million in new notes as part of a bankruptcy settlement Detroit reached with bond insurer Financial Guaranty Insurance Co. on Thursday.
The FGIC deal includes a plan to replace Joe Louis Arena with a hotel, condominium and retail development.
If Detroit had continued to battle FGIC in court, and lost, "it would be fairly catastrophic from my perspective," Orr testified Tuesday.
Testimony continues Wednesday from Martha Kopacz, the judge's handpicked expert who is expected to say Detroit's plan to shed more than $7 billion in debt is feasible.
She concluded in a July report that Detroit needs a larger and better-trained workforce and commitment from its elected leadership to carry out the massive restructuring. Closing statements in the trial are set to begin on Monday.
The judge said he intends to deliver a decision during the week of Nov. 3 on whether he will confirm the city's plan.