So Detroit, or more likely, the State of Michigan, is paying a “bankruptcy expert” to manage Detroit’s financial mess and the bankruptcy expert Emergency Manager hires his former law firm at $1000 per hour to do the work the Emergency Manager was hired to do. This should go over well with the natives. From CBS Detroit:
“Emergency Manager Kevyn Orr approved the fees totaling about $1.4 million, but what makes this even more controversial is that the law firm getting the money is Jones Day – that’s Orr’s former law firm. Oh, you want some more controversy? That $1.4 million is just for six weeks of work,” Langton said.
The report says the costs were associated with sophisticated restructuring advice, labor and pension analysis, and Chapter 9 planning. Orr has defended the expense, saying top lawyers are needed because of what’s at stake . . .
Orr is a bankruptcy expert hired in March by the state to fix Detroit’s finances . . .
As most of us know, actions have consequences. The potentates of Detroit have ignored the inevitable consequences of their fiscal and moral profligacy for over forty years. Now the rest of us will pay the bill in one way another, whether through state and federal bailouts or through higher municipal and state borrowing costs. The architects of the disaster will pay no price, rather, most will collect lucrative pensions.
Emergency Manager Kevyn Orr’s plan to suspend payments on $2 billion of Detroit’s debt threatens a basic tenet of the $3.7 trillion municipal market: that states and cities will raise taxes as high as needed to avoid default . . .
“It definitely sets a precedent, and there’s definitely going to be a penalty going forward for the city and the state,” said Dan Solender, director of munis at Lord Abbett & Co. in Jersey City, New Jersey. The company oversees $19.5 billion of local debt.
DETROIT (WWJ) – . . . Detroit Emergency Manager Kevyn Orr . . . sat down in a closed-door meeting with about 150 creditors, bond holders and unions to discuss the city’s fiscal situation, seeking concessions that would save Detroit millions of dollars in payments.
Perhaps the most dramatic aspect of his plan: Orr said, starting now, there will be a moratorium on debt payments for all unsecured funded debt. Creditors are being asked to take about 10 cents on the dollar of what’s owed them. Underfunded pension claims would get less.
This latest comes as Detroit continues to spend more money than it takes in as revenue. The city’s budget deficit could top $380 million by July 1, and Orr now estimates the city’s long-term debt at $20 billion.
As part of the proposal, Orr said he wants to invest $1.25 billion in the city for police and fire; and $500 million to fight blight.
“We’re tapped out,” Orr said.
“Mayor Bing said he thinks it would make sense pass a law that mandates that new employees of the city [Detroit] remain residents of the city of a period of seven years.
“In seven years a lot of things can change. And I’m hopeful in seven years we’ll see the city change and people will want to come back to the city,” he said.”