Just who is Kevyn Orr?

[Novine]

"Council cannot vote when eliminated......

The EFM doesn't have the power to eliminate the City Council. There's limits to the benevolent dictatorship.

[kenp]

Council will remain, just basically powerless.
This EFM must be a socialists dream. You would think most Detroiters would favor this

[mwilbert]

Council will remain, just basically powerless.
This EFM must be a socialists dream. You would think most Detroiters would favor this

This is a misunderstanding of either socialists, EFM's, or both. The EFM doesn't have the power to tax. He doesn't have the power to do uncompensated takings. He operates under rules that are intended to privilege creditors while reducing government spending on services to the public. There is literally nothing socialist about such an appointment.

[kenp]

I will make a bet with you that there will be more government spending on services to the public now that there is an efm in Detroit

[mwilbert]

We can hope.

[casscorridor]

This is a misunderstanding of either socialists, EFM's, or both. The EFM doesn't have the power to tax. He doesn't have the power to do uncompensated takings. He operates under rules that are intended to privilege creditors while reducing government spending on services to the public. There is literally nothing socialist about such an appointment.

This is essentially correct. Also, I don't see how services are going to improve under this scenario. Sure you can squeeze savings from layoffs and wage cuts, and efficiencies but at a certain point, services are going to decline if you keep cutting funding, and you have to remember these are services that have already been severely cut.

[kenp]

This is essentially correct. Also, I don't see how services are going to improve under this scenario. Sure you can squeeze savings from layoffs and wage cuts, and efficiencies but at a certain point, services are going to decline if you keep cutting funding, and you have to remember these are services that have already been severely cut.

Because the state controls the funding it will now increase. The Govener now has the challange of paying for this and getting Lansing on board. There is money coming.

[Det_ard]

And everyone agrees there is incredible mismanagement and inefficiency currently. Service delivery can improve even if costs don't.

[Mark Smiles]

I don't think it matters what political party he is in. Snyder's whole advantage of appointing an emf as to handing the city off to a bankruptcy judge is that Snyder gets to appoint the emf. So it would only make sense that who ever Snyder picks would be either a puppet or someone who is willing to go along with anything Snyder says or wants.

Isn't the point of hiring someone, to get what you want done?

[Novine]

It was all happy talk when Robert Bobb took over the schools. We saw how well that worked out.

[corktownyuppie]

It was all happy talk when Robert Bobb took over the schools. We saw how well that worked out.

One doesn't relate to the other. We've been hearing happy talk in Detroit for 30 years. We saw how well that worked out, too.

The game changer is that Orr is going to drop the hammer and get creditors to take haircuts. Will it be enough? We'll have to see.

[313WX]

It was all happy talk when Robert Bobb took over the schools. We saw how well that worked out.

Even Robert Bobb said there's no way Detroit's finances would be resolved in 18 months. Given that he's had actual experience with Detroit's situation in damn near the exact same position, I would believe him over Snyder and Orr's horn-tooting rhetoric. Not even Jesus can fix our decades of stupid in less than 2 years [[assuming it's fixable and not FUBAR).

And based on his demeanor in his last interview about Detroit and Michigan's EM experiment, I'm betting Bobb would pass on the job if he had to do it all over again.

[corktownyuppie]

And based on his demeanor in his last interview about Detroit and Michigan's EM experiment, I'm betting Bobb would pass on the job if he had to do it all over again.

I agree that he would probably pass on it. But here's part of the problem. Bobb couldn't have total operational control. As a result, he had to fight in order to get his agenda done.

When Orr goes to the bondholders and pensioners, if they negotiate in good faith, they probably could get it done. Could. But if their strategy is to provide every existing legal challenge in an effort to force their own way, then it's over. We'll be in bankruptcy court for years.

[Wesley Mouch]

Seems to be an article of faith by some that DPS finances haven't improved. Can anyone give an impartial factual update on DPS under EFM?

[313WX]

Seems to be an article of faith by some that DPS finances haven't improved. Can anyone give an impartial factual update on DPS under EFM?

Most of the deficit reduciton came from privatizing those 15 schools.

Even Roberts said he's not sure how to tackle the remaining $76 Million Dollar Budget Deficit.

The actual debt load has increased though.

In any event,the state of Michigan's goal for performing these financial rreforms was to assure the children in the city of Detroit get a decent education. Is that happening?

Likewise, the state of Michigan's over-stated goal for Detroit is to assure the citizens in the city of Detroit get the services they deserved. Will that happen? Remains to be seen.

[jtf1972]

Mr. Orr will have a great hand in the future of Detroit. We all need to be hoping and praying for his success, as Detroit's is riding on it.

[Shollin]

Detroit — The man charged with fixing Detroit's faltering finances has been hit with four liens in four years from the state of Maryland for unpaid taxes, records show.

State records show Kevyn D. Orr, who was appointed emergency manager on Thursday, has two outstanding liens on his $1 million home in Chevy Chase, Md., for $16,000 in unemployment taxes in 2010 and 2011. Two other liens of more than $16,000 in unemployment and income taxes were satisfied in 2010 and 2011, records show.

Orr said he didn't know anything about the liens when shown records of them Friday morning by The Detroit News.

"I don't know what they are," Orr said, as his new boss, Gov. Rick Snyder, sat next to him in The News' offices. "That's surprising to me, to be honest."

http://www.detroitnews.com/article/20130316/METRO01/303160352/Records-show-Detroit-s-emergency-manager-has-tax-liens-his-Maryland-home?odyssey=tab|topnews|text|FRONTPAGE

[Novine]

"When Orr goes to the bondholders and pensioners, if they negotiate in good faith, they probably could get it done. Could. But if their strategy is to provide every existing legal challenge in an effort to force their own way, then it's over. We'll be in bankruptcy court for years."

Snyder and Dillon have stated that the city has 5 major liabilities that the EFM is to resolve.

1. Water and Sewer Debt - $6 billion - In reality, this is a paper debt of the city. It's really the debt owed by those who use the water and sewer system and there's talk of officially regionalizing the debt by spinning off DWSD. At best, this debt will be refinanced. But there's no reason for the bondholders to give anything when they know that water and sewer rates can be raised to cover the debts if the current revenue isn't sufficient to pay it off.

2. Pension Obligations - Because pensions are protected by the state constitution and come due over an extended time frame, I see little reason for pensioneers to come to the table to agree to cuts in their retirement pay. Also, who would represent this group in negotiations? There's no one in the position to say they can speak for the thousands of retired employees and beneficiaries receiving a pension. Even if the pension board came to some agreement with Orr, there's nothing to stop pensioneers from suing the city for failing to provide their promised pension. In some communities, judges have slapped tax levies onto taxpayers to honor those pension obligations. The average payment to general retirees is about $17,500 a year and $29,000 a year for police and fire retirees. Starting in 2012, new patrol officers don't qualify for a pension.

However, there is this provision in the new EFM law that Orr may use "If a municipal government’s pension fund is not actuarially funded at a level of 80% or more, according to the most recent governmental accounting standards board’s applicable standards, at the time the most recent comprehensive annual financial report for the municipal government or its pension fund was due, the emergency manager may remove 1 or more of the serving trustees of the local pension board or, if the state treasurer appoints the emergency manager as the sole trustee of the local pension board, replace all the serving trustees of the local pension board."

That likely explains why there's been a lot of talk by Dillon and others claiming that the Detroit pension funds aren't actually funded to 80%. That would allow Orr to take control of the pension funds and enter into an agreement with himself!

3. Retiree Health Care Obligations - $5 billion - These obligations are not protected by the state constitution. Orr could wipe these obligations out by simply refusing to honor the promise the city made to its retired employees to assist with health care costs in retirement. Again, there's no one entity that can claim to represent all of the retirees so it's likely any move in this direction would result in litigation.

4. General Obligation bonds - $1 billion - These are debts that were issued after receiving voter approval. As repayment of these are covered by dedicated millages, these bondholders have no incentive to make a deal and even if they were cut, that would only affect the city's overall tax rate, it wouldn't result in any additional revenue to the city's operating funds.

5. Short-term debt - $1.5 billion - These are the bonds that the city has sold to finance operations over the past 10 years or so to make up the revenue shortfalls. These bondholders are the most exposed and the ones that Orr may be able to get to agree to reductions. But they'll probably demand some kind of guarantee of future payments through a dedicated revenue source as has been done previously with Casino revenues.

Keep in mind that under the new EFM law, one of the primary responsibilities of the EFM is to make sure that debt holders get paid, not to provide services to residents.

"The financial and operating plan shall provide for all of the following...The payment in full of the scheduled debt service requirements on all bonds, notes, and municipal securities of the local government, contract obligations in anticipation of which bonds, notes, and municipal securities are issued, and all other uncontested legal obligations."

[kenp]

So we have another guy who can't even manage his own personal finances in charge of the city finances.
Come on.

[Cliffy]

So we have another guy who can't even manage his own personal finances in charge of the city finances.
Come on.

You didn't get the memo, rich people don't have to pay anything. If it was you or I, they would have padlocked the doors and taken the house.

[fanniemae]

So we have another guy who can't even manage his own personal finances in charge of the city finances.
Come on.

Because of the nannygate issues that face govt. employees that work around DC, Maryland has tough tax laws. Not that I am defending Orr, but when faced with the tax liens he eventually pays them. This guy is probably a bit of a high roller in the world of finance. This tax lien is a pimple on his butt compared to other issues. I urge caution in condemning the man on the tax lien issue. If other skeletons are found in his closet, well then I will be concerned. Our former treasury secretary had huge tax problems, yet he was still given a job. Not that I liked that situation, but this is the way the world works unfortunately.

[Gannon]

Keep in mind that under the new EFM law, the one of the primary responsibilities of the EFM is to make sure that debt holders get paid, not to provide services to residents.

But...but...but...I heard him say delivering services to his customers, I mean the citizens, was the first thing on his agenda.

Let's hope he honors his agenda more than Snydely does.

My expectations are not too high about that.

[Lowell]

Novine, thank you for an outstanding analysis of the City of Detroit debt situation!

[Lowell]

Give him a chance to do what? It's not as if he's going to be able to rebuild Detroit's tax base and until the city is growing, not shrinking, he's simply cutting off limbs to keep the patient alive until he leaves, to follow the surgery analogy he used yesterday. Even if he's allowed to rebuild city government from the ground up, which no one could do in 18 months, it doesn't change the reality that Detroit is too poor, too lacking in human capital and has massive legacy costs in areas like infrastructure that no bankruptcy can fix. No amount of right-sizing of city government can change those realities and it's going to take years of rebuilding city services to change that reality. Is he going to implement the Detroit Future City plans? Is that even within the mandate of his position? With Bing and City Council sidelined, my best guess is that DFC is sidelined with it and while Orr focuses on finances, any of the other major initiatives that need to happen that were outlined in DFC aren't going to happen to any appreciable degree.

I have long made a similar assessment regarding the hopelessness of Detroit's position of having to carry the burden of the region's and state's poor, homeless, felons and disabled who are incapable of paying taxes yet require great expenditures. In a sense the city has become a dumping ground for the state and metro's burdens.

Any limbs he might cut off are falling off anyway so I am not sure if that matters that much. I am holding out hope that the outcome will result in regional sharing of this burden - perhaps through insurance control and tax sharing. So I will give him a chance, not that we actually have a choice anyway.

[kenp]

For this to work there has to be good PR towards the citizens. Obviously there are major financial issues here but also funding services for the city has to be considered. They need to get the citizens on board.