1. Detroit is out of bankruptcy, but not out of the woods yet

Detroit is out of bankruptcy, but not out of the woods yet

This city formally emerged from court protection on Wednesday, bringing to a close the largest municipal bankruptcy in American history after about 17 months. Yet the end of the bankruptcy was also the start of what may be a still more difficult, lengthy test — of Detroit leaders’ ability to chart a new, sustainable course […]

By: | Detroit | Published: December 12, 2014 12:10 AM

This city formally emerged from court protection on Wednesday, bringing to a close the largest municipal bankruptcy in American history after about 17 months. Yet the end of the bankruptcy was also the start of what may be a still more difficult, lengthy test — of Detroit leaders’ ability to chart a new, sustainable course for a city rescued from financial collapse but still struggling.

“How do you deliver service in a city where the unemployment rate is double the state average, and we’ve got to rebuild a water system and a bus system and a computer system and a financial system?” Mayor Mike Duggan asked on Wednesday, adding, “It’s all going to be a challenge.”

Duggan appeared in a news conference beside governor Rick Snyder, who announced that he no longer considered Detroit to be in a state of financial emergency, and beside Kevyn D Orr, the state-appointed manager who said he was no longer needed to oversee city spending and operations as he has since March 2013, and was returning control to elected leaders.

The group assembled here, heaping praise on Detroit’s progress, might once have seemed unlikely to sit in the same room.

Though the bankruptcy case was ultimately resolved with deals struck with Detroit’s major creditors, the notion of bankruptcy had irked many city leaders, who initially accused the state’s white, Republican leadership of unfairly seizing control of this mostly black, Democratic-run city.

“We still have enormous challenges delivering services in the city every day, but at least now we are no longer a city that’s in bankruptcy,” said Duggan, who took office almost a year ago, even as Orr held control of most major decisions and as the bankruptcy case was making its way through court. “So we’re going to start fresh tomorrow. And we’re going to do the best we can to deliver the kind of services that the people in the city deserve.”

Duggan said that the reorganization plan — which allows Detroit to shed $7 billion of its debts and to spend about $1.7 billion to remake its dismal city services over the next 10 years — “gives us the tools to have a chance to succeed.”

While Duggan and members of Detroit’s City Council are expected to regain control over governance, the court-approved exit plan requires strict oversight of the city’s finances in the years ahead by a commission that includes a majority of representatives appointed by the state. That commission has already begun holding meetings. If the city stays within its budgets for three years, the commission’s role will shift, though the commission may provide some oversight for at least 10 years beyond that.

The city has been billed about $177 million by lawyers, turnaround experts and others for work on the bankruptcy, though officials said final bills had been a matter of debate, still to be approved.

Even with a clean financial slate, questions remain about how Detroit can shift its fate, stop an exodus of taxpayers and bring jobs and improvements to the hardest-hit neighborhoods in a city with a footprint designed for a population that was once more than twice as many as the approximately 700,000 residents here now.

The Detroit public school system, too, has its own set of woes; it is overseen by an emergency manager because of its own financial crisis.

But Snyder noted areas of improvement. He said that the city’s homicide rate, which was at its highest in 40 years when Detroit entered bankruptcy in 2013, had fallen 18%; he said police response times, 58 minutes on average according to an examination last year, were now less than 18 minutes. And a plan is underway to replace the city’s streetlights, 40% of which failed to work not long ago.

Orr, a bankruptcy lawyer who lives in Maryland, had faced a difficult path after being appointed by Snyder to oversee nearly all of the city’s major decisions.

At times, Orr was viewed skeptically by leaders, who saw him as grabbing their roles, and by union members, who saw him as a threat to their pensions.

By the time he leaves Detroit, Orr is expected to have been paid about $504,000 by the state, city officials said.

“The reality is the city is moving forward,” he said. “That gives me a great deal of pride and satisfaction, but it truly is bittersweet.” NYT

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