Meet the Experts: Bankruptcy judge chooses two analysts to assess eventual plan

April 23rd, 2014

Bankruptcy Judge Steven Rhodes was looking for some help and he’s getting it. Today he selected an expert witness and a “non-testifying consultant” to help him evaluate whatever final plan the city submits to him.

Rhodes wants to make sure that Detroit’s exit from bankruptcy creates a sustainable future city government and he’s bringing in some expert help in the form of experts in accounting, restructuring, public finance, management and other disciplines besides law.

The expert witness’s role will be “not to help the city solve its problems,” Rhodes said during the interviews. “This limited assignment is simply to help me evaluate the feasibility of the city’s plan, whatever it may be when it comes up for confirmation, and the reasonableness of assumptions that go into its assertions of feasibility.”

Rhodes, who solicited applications for the position, interviewed five finalists last week. Today he appointed Martha Kopacz as the expert witness who will investigate whether the city’s plan is “feasible” and “whether the assumptions that underlie the City’s cash flow projections and forecasts regarding its revenues, expenses and plan payments are reasonable.” He also named Richard Ravitch as a “consultant on issues of municipal finance and viability”

So who are they?

For starters, they’re both from the East Coast. While many bankruptcy observers would have liked the expert to have been “locally sourced,” both Kopacz and Ravitch have decades of experience and a keen interest in Detroit. We have more from their resumes below.

Why are they interested in this position in Detroit?

From Kopacz: “There’s something about just doing a good turn, doing what’s right in a very complicated situation. Detroit, it could be Boston, where I’m from. It could be Baltimore. It could be any number of cities, and if this city and this constituency here get it right, it’s going to lay a nice foundation for other cities, other municipalities to get things right down the road.”

From Ravitch: “If I can help, that’s better than a dozen more golf games his summer.”

How much will they cost?

Kopacz said during her interview that her fees would range from $800,000 to $1.2 million and cover up to five people working up to 60 hours a week, she said during her interview.

Ravitch, 80, is serving without compensation.

What are their resumes?

Kopacz is senior managing director at the Boston-based Phoenix Management Services and for 30 years has worked in bankruptcy and restructuring, mainly in the private sector but with some experience in nonprofit and public sector work, according to her resume.

Ravitch is a former New York lieutenant governor. He currently is a partner in Waterside Plaza, a New York City housing development, and has been chairman of the NY State Urban Development Corporation, created the NY State Project Finance Agency, and worked with New York city and state officials during the 1970s on the city’s defaults. He also has been chairman and CEO of the NY Metropolitan Transportation Authority and co-chaired the State Budget Crisis Task Force, which was discussed during a recent Wayne State University conference “Detroit’s Bankruptcy and Beyond: Organizing for Change in Distressed Cities.”

Here are a few quotes from Kopacz during her “interview” in bankruptcy court last week:

“This is a unique role in which not only don’t I have a client that has a pre-existing perspective but I can’t have a pre-existing perspective. I have to have complete independent, complete lack of prejudice coming into it.”

“I think there is an awful lot that our public sector organizations can learn, if you will, from what we have been doing for many years on the corporate side in terms of how to improve outcomes for a variety of constituencies.”

“You’ve got to be able to execute on the plans.”

“Central Falls (Rhode Island) is a Chapter 9 that worked, is working right now, and if Chapter 9 is as successful on a larger scale as it was for a town that is about 10 square miles with and eight-figure budget, yes, I could be a wonder tool to restore some financial stability to some of our struggling municipalities.”

“At the end, the Detroit Chapter 9 is about change. It’s a giant change project for the city. … Chapter 9 is not something to be considered lightly. “

Here are a few of Ravitch’s comments from his responses to questions in bankruptcy court last week:

“You don’t solve an operating budget problem by borrowing money. That’s lesson one, lesson two and lesson three.”

“A city that fails to maintain its capital infrastructure adequately will accelerate the economic change that occurred.”

“The law created arguable distinctions but if you start off with that premise about values and understand about collective bargaining by municipalities over the years and the extent to which a lot of contracts were entered into increasing retirement benefit rather than increasing current compensation at the time, this is a very, very complex problem.”

“To have meaningful judgment about something …requires both experience which I‘d like to think I have and the ability to communicate and question an awful lot of people.”

“I believe that the future of the city depends on being able to compensate people decently for public service, otherwise there will be no public services. That’s a sure way to ensure that Detroit doesn’t come out of this mess.”

-By WDET’s Sandra Svoboda

@WDETSandra and nextchapter@wdet.org