Kevyn Orr

  • DWSD bond deal approved in advance of bankruptcy trial…with timeline of deal

    Judge Steven Rhodes today approved  the city’s plan to refinance $1.5 billion of its water department debt.

    Earlier this month, the city announced a tentative agreement with creditors for the Detroit Water and Sewerage Department. The deal would allow for the refinancing of long-term debt because the city would buy back and then re-issue bonds. Since then, several bondholders have accepted the new terms. About $1.5 billion worth of water department debt will be re-financed at a lower interest rate under the plan.

    Emergency Manager Kevyn Orr testified today  that the deal saves the water department more than $ 11 million annually on debt service for about two decades. It also means several creditors will no longer object to the city’s financial restructuring plan because their bonds are not impaired as part of the settlement, which will help confirmation of the city’s Plan of Adjustment when the trial begins Sept. 2.

    Here’s a timeline of how the DWSD deal unfolded:

    Aug. 6: The Detroit Water and Sewerage Department approved a deal to allow the re-financing of about $5.2 billion in debt. After weeks of confidential mediation sessions, the city and its water department bond holders and insurers reached the agreement. It allows the city to buy back existing bonds and then re-sell them at a lower rate to pay off old debt. Commissioners for the Detroit Water and Sewerage Department say the deal will save customers money and reduce some operating costs for the department.

    More on that announcement here.

    Aug. 7: DWSD invites holders of water supply system bonds and sewage disposal system bonds to tender their bonds.

    Aug. 12: The Michigan Finance Authority passed a resolution approving financing for the bonds if the tender went through.

    Aug. 13: The Detroit Board of Water Commissioners authorized the terms of the new funding for bonds.

    Aug. 14: Detroit’s Emergency Manager Kevyn Orr issued an order that ratified the Board of Water Commissioners resolutions. The Detroit City Council approved the re-financing deal.

    Aug. 19: The Michigan Department of Treasury authorized the bonds.

    Aug. 22: The Detroit Board of Water Commissioners  accepted the bonds that had been tendered. The Emergency Manager approved and ratified the board’s order.

    Aug. 25: City attorneys argue to Judge Rhodes in favor of the agreement, which he approved.



  • Bankruptcy trial delayed, new start date of Aug. 29

    Judge Steven Rhodes decided the largest municipal bankruptcy trial in history should not start until the debtor — the city of Detroit — files another Plan of Adjustment. So he moved the start date from next week to Aug. 29.

    (We discussed this possibility on WDET’s Detroit Today program. Listen here.)

    The city has filed six previous Plans of Adjustment, “blueprints” it will use to restructure debt and city services. But city attorneys told the judge in court earlier this week that they plan to file yet another plan that will reflect a deal announced last week to potentially refinance $5 billion worth of Detroit Water and Sewerage Department bonds. Some creditors’ attorneys objected, saying they could not adequately represent their clients in the trial, also called a “confirmation hearing,” without seeing the city’s overall plan.

    Judge Rhodes in his order today that “the Court concludes that this constitutes extraordinary cause to adjourn the dates and deadlines that it previously established.”

    Under questioning from Judge Rhodes earlier this week, city attorney Heather Lennox, of the Jones Day law firm, admitted one reason the city did not want to delay the confirmation hearing was because the current Plan of Adjustment requires Detroit Emergency Manager Kevyn Orr to execute some of its provisions by order, a power granted to him by state law. When Orr’s term is up at the end of September, elected leaders won’t have the same ability. Lennox said those orders related to settlements on the Unlimited Tax General Obligation bonds and Limited Tax General Obligation bonds.

    Here’s part of the exchange in court between Judge Rhodes and city attorneys on Tuesday.

    Judge: It’s a question I’ve asked before, but I feel the need … To what extent is the urgency that the city feels about beginning and ending this trial motivated by the prospect of Mr. Orr’s leaving his emergency manager position? And if so, why?

    City attorney Gregg Shumaker, of Jones Day: I know we’ve gone back and forth on this in the past, but a lot of it has to do with the implementation of the plan. …

    Lennox: … The point of the proceeding is it does really impact more about what the plan does and the settlements we have and the timeframe for getting them done … if the plan is going to be confirmed, there are some critical things that need to be happening in the near term. … For example, retiree health care. The settlement that we reached with the Retirees’ Committee on retiree health care back in April is that at the end of this year, the city will exit the retiree health care business and it will be taken up by two VEBAs. They have to appoint trustees, contract with providers and administrators, develop programs, notify retirees, all before Jan. 1, 2015. That process takes a few months. We are coming dangerously close on being very tight on time for that. … We’re not sitting around waiting. There is a lot of work that is being done. But we don’t have VEBAs officially and we don’t have trust officers, and we can’t until the plan has an effective date. … there are some real world issues based on settlement that we accomplished months ago. …

    Judge Rhodes: That’s an urgency that’s unrelated to Mr. Orr’s transfer out of his current position?

    Lennox: There’s not much Mr. Orr can do about that state statute. … With respect to the plan, there are settlements and agreements in the plan that require powers and orders under PA 436 (Michigan’s emergency manager law). … For example, the LTGO and UTGO settlements, those require emergency manager orders. Those are orders that can’t be ordered until after confirmation.

    Here’s the judge’s full order delaying the trial and setting new dates and deadlines for other happenings in the case:

    8.13.14 8th Amended Scheduling Order

  • What’s in the deposition transcripts?

    In advance of the city’s bankruptcy trial, scheduled to begin Aug. 21, attorneys are taking depositions from a number of people, gathering information that will inform and help shape legal strategies during the confirmation hearing on the city’s Plan of Adjustment.

    And lucky for us, the Detroit Free Press has obtained partial transcripts of a few of them, namely Mayor Mike Duggan’s and City Council President Brenda Jones.

    Duggan say it’s  “entirely possible” that Orr  remain in Detroit after Sept. 27, which is the first date the City Council can vote to dismiss him, according to the Michigan emergency manager law. The Freep reports Duggan saying he has discussed the prospect with Jones and some council members.

    “Certainly Mr. Orr’s background and expertise are probably going to be needed post Sept. 27,” Duggan testified Friday in a deposition tied to the city’s upcoming bankruptcy trial. “It just would not be in the role of emergency manager.”

    Jones, meanwhile, told attorneys she fell asleep several times while reading the 900 pages of bankruptcy documents city attorneys provided her.

    “I have tried to review it and fell asleep with that reviewing,” she testified.




  • One Year In: Today marks one year since Detroit bankruptcy petition was filed

    At exactly 4:06:22 p.m. today, Detroit’s bankruptcy hits the one-year mark. Detroit News business columnist Daniel Howes said it well:

    “There will be no celebrations at 4:06 p.m. Friday, only quiet acknowledgment that the largest municipal bankruptcy in American history is marking its first year.”

    The Detroit Free Press marked the anniversary with a package of stories last weekend that explored the year in court, the effect in the communities and the new political structure at city hall. Later this week, the Freep published a report predicting a population decline that will make the future even more challenging.

    The costs of this municipal bankruptcy itself are high, to be sure, the highest in history. As of June, the city had been billed $75 million by 19 law firms and financial consultants involved in the case, Crain’s Detroit Business reported.

    While not everyone likes the negotiated terms that are emerging in the settlement, there is no doubt Detroit’s bankruptcy is moving toward resolution faster than anyone could have expected a year ago. It still faces a confirmation hearing, scheduled to begin Aug. 14, and Judge Steven Rhodes will undoubtedly see in the mirror the proverbial King Solomon as he tries to find the fairness and reasonableness to creditors, including city retirees, in the plan. He also knows he’ll be setting legal precedent as he crafts the settlements and restructuring plans, which will be used in future municipal bankruptcy cases across the country.

    We can describe with relative certainty a few elements of the next stage of this case: The pensioners will take cuts to their monthly checks and pay hundreds of dollars more out of pocket for health care. International media will print, broadcast and post more photos of blight juxtaposed against the RenCen as they try to chronicle the decline and possible resurgence thanks to bankruptcy of this city. Courts will decide the legality of the state’s emergency manager law, the remaining pre-trial issues in the Chapter 9 case and future appeals. Lawyers will make more money. Mayor Mike Duggan and the city council will eventually assume control of the city’s departments with “clean” balance sheets and a responsibility to all the city’s neighborhoods, residents, business owners, investors and oversight committees created by the state in the terms of the $195 million pension contributions.

    Whether we see real improvements in access to jobs, quality education for children and adequate public safety for everyone remains to be seen. Lansing, quick to congratulate itself for the package of bills providing money and oversight, could do more and should be pressured to do so. What could possibly be on that agenda? How about statewide reform to municipal finance and a re-examination of revenue sharing, regional transit to help Detroiters get to jobs in the suburbs and help with collecting income tax from Detroiters who work outside of the city. Those three elements would be a start but the governor and the Legislature have been silent on those issues.

    Many of us will continue to frame the city’s bankruptcy with the competing if extreme truths that “there will be a course change to reroute Detroit’s economic decline, failure of public institutions and creating protections against corruption” and “the bankruptcy is undermining unions, codifying the legality of slashing public benefits and creating huge billing tallies for silk-stocking law firms.” Hopefully how we define the bankruptcy’s causes will not limit our ability to emerge from it and restore city services, improve life for residents, ensure fiscal stability and make countless other improvements.

    As for the Emergency Manager’s future plans when his term expires later this year? He told WWJ radio’s City Beat Reporter Vickie Thomas that he’ll “leave quietly,” saying he was surprised by the level of public scrutiny the case brought to him and the city.

    “I think it’s appropriate for me, when this does come to an end, to exit quietly — I’m off the stage — and let the regular order return and let the city’s sort of healing process take; and let the patient recover on their own,” Orr told Thomas.

    7.18.13Bankruptcy Petition by WDET 101.9 FM

  • On The Craig Fahle Show: The past and future for Michigan’s EM law

    What happens after Detroit Emergency Manager Kevyn Orr leaves the city? Who should be involved in the transition, and how should it be handled? Two local emergency managers join WDET guest hosts Christy McDonald, from DPTV, and Chastity Pratt Dawsey, from Bridge Magazine, to discuss how the city may transition back to a traditional governing structure and other issues. The guests are Joyce Parker, the current emergency manager of Allen Park, and Lou Schimmel, the former emergency manager for Ecorse, Hamtramck and Pontiac and currently on the transition advisory board in Pontiac.

  • On Michigan Radio: A deep dive into Michigan’s emergency manager law

    Three years ago, only a half-dozen cities and school districts in Michigan were being run by state-appointed emergency managers. Today, 17 are in some phase of receivership. Detroit Emergency Manager Kevyn Orr filed for bankruptcy, history’s largest for a municipality. Bridge magazine writer Chastity Pratt Dawsey examines the effectiveness of the emergency manager law and how it measures up to similar laws in other states in a report for the magazine’s latest issue. She joined Michigan Radio’s Stateside program.

  • From Bridge Magazine: Are they emergency managers or emperors?

    Michigan receivership laws are stirring contempt in fragile communities. Bridge Magazine’s Chastity Pratt Dawsey reports on Michigan’s aggressive emergency manager law, how it’s mired in litigation and what other states – notably, North Carolina and Rhode Island – have succeeded with through more proactive and inclusive approaches in distressed cities.

  • Orr grants city appointees, elected officials a pay raise

    Detroit emergency manager Kevyn Orr has given the city’s leaders a pay raise. Orr signed an order hiking city appointees and elected officials’ pay by 5 percent at the end of June. It went into effect July 1. Michigan Radio’s Sarah Cwiek reports on the pay increases, which are part of the bankruptcy restructuring plan.

  • On Michigan Radio: One week left in bankruptcy plan voting

    The clock is ticking. Detroit’s bankruptcy settlement has gotten through the State Legislature, and the private foundations have chipped in for pension funding. Now the 32,000 city employees and retirees are being asked to say “yes” to having their pensions cut, and promising not to sue the city. In return, the pension cuts will not be as severe as they would be under what’s become known as the Grand Bargain. Michigan Radio’s Detroit reporter Sarah Cwiek joins Stateside and explains the transparency issue surrounding the voting process, what the different classifications of retirees mean, and what we should keep our eyes on, during next week leading up to the July 11th deadline.

  • From the Michigan Citizen: Another view of the “grand bargain”

    As we’ve reported, the so-called “grand bargain” isn’t considered so grand by many people. Here, our Detroit Journalism Cooperative partner The Michigan Citizen opines about why the deal isn’t so great, calling out city council members and Detroit legislators for their support. “This governor put Orr and  Orr’s former law firm Jones Day in place to push Detroit into bankruptcy, strip retirees of health benefits, threaten retirees to vote their way, take a portion of retirees’ pension; and redirect every viable asset of the city so it is under control of some authority — not the people’s duly elected representatives. … But when the people have representatives like Spivey and Sheffield, Stallworth and Durhal —who are happiest doing the governor’s dirty work — the people really haven’t got much.” Read more here.