Turnaround specialist Kevyn Orr named Detroit emergency manager

Kevyn Orr at his first press conference just before being named Detroit's emergency financial manager. He appeared with Gov. Rick Snyder and Detroit Mayor Dave Bing. (Photo by Tanya Moutzalias)

Story by Michigan Live
Written by Khalil AlHajal

DETROIT, MI -- Gov. Rick Snyder recommended bankruptcy attorney Kevyn Orr take over the city of Detroit as an emergency financial manager.

Orr appeared with Snyder and Detroit Mayor Dave Bing on Thursday for the announcement. His appointment should be finalized this afternoon by the Local Emergency Financial Assistance Loan Board.

The decision comes after months of talks, proposals, financial reviews, hearings, confrontations and protests.

During the press conference, Orr said he could complete a financial turnaround of Detroit within 18 months. He also said he resigned his job in Washington D.C. yesterday to take the emergency manager job.

Following the 40-minute press conference, Orr met with the loan board to formally accept the position. The board will also set Orr's contract, including salary.

The Detroit News reports this afternoon the Detroit City Council won't legally challenge the emergency manager appointment, which is expected to be finalized in Lansing on Thursday at 3 p.m. by the Local Emergency Financial Assistance Loan Board.

As emergency manger, Orr will have the authority to strip elected officials of their powers and pay, sell city assets and void union contracts.

Activists who oppose state takeovers last year got the Michigan law granting those sweeping powers repealed in a state referendum.

Lawmakers passed similar new legislation that goes into effect this month, and as a takeover began to appear inevitable in recent days, protestors started staging highway demonstrations, slowing traffic to a crawl. Some have said they'll continue to take drastic action, including forming a human chain around City Hall to keep out an emergency manager.

The new emergency manger law, Public Act 436, did include a significant change from the rejected version.

It gives elected officials in local governments under financial emergency the choice of bringing in an emergency manger, continuing a consent agreement with the state, mediation or bankruptcy.

But Detroit doesn't have that choice, because the law doesn't go into effect until March 27.

Other Michigan governments under state-appointed emergency mangers include Flint, Pontiac, Ecorse, Allen Park, Benton Harbor and the Highland Park, Detroit and Muskegon Heights school districts.

An emergency manager in Detroit would be handed the responsibility of addressing the city's $327 million deficit and $14 billion in long-term debt.

The gargantuan task involves restructuring debt and reorganizing government under the cloud of outdated and faulty technological systems, massive debt service payments, rampant crime and vast blight throughout most of the city.

Mayor Dave Bing and City Council, though frequently butting heads along the way, implemented dozens of reforms, dramatic cuts and efforts to raise revenue in recent months.

But the changes, which included cuts to employee wages, park closures, fire station closures, police unit disbandment, major outsourcing moves, health care changes and other desperate measures like selling scrap metal from abandoned vehicles, weren't enough, according to a review team that studied the city's finances.

The review team, led by state Treasurer Andy Dillon, last month determined that the city was in financial emergency with no "satisfactory" reform plan, setting the stage for Snyder to launch a takeover.

Bing disputed the assertion that there is no viable plan in place and questioned some of the numbers reported by the review -- including the $14 billion long-term debt estimation that includes obligations from separate, revenue-generating entities like the water department -- but ultimately chose to stop fighting a state takeover.

He announced last week that he wants to cooperate with an emergency manager, rather than continue to resist.

City Council, knowing that it was unlikely to sway the governor, appealed the state's moves toward a takeover, telling a Treasury official in a hearing this week that the consent agreement implemented last year should have been given more time.

City lawyers argued that an emergency manger will renew legal and employee morale challenges that began with the state's involvement last year and were only recently overcome.

The council has been considering filing a lawsuit against a state takeover.

The mayor, meanwhile, announced this week that he has chosen the Cleveland-based Jones Day law firm to serve as the city's "restructuring counsel."

Multiple media outlets, citing sources close to the process, reported that Jones Day partner Kevyn Orr is the governor's top pick for emergency manger.

Orr, a University of Michigan graduate, is a nationally known top bankruptcy lawyer who represented Chrysler in its 2009 restructuring and has worked for the U.S. Department of Justice and the Federal Deposit Insurance Corporation.

Orr -- who would face opposition from some residents and City Council members who have frequently evoked the civil rights movement in questioning a takeover by a white, Republican governor in a city that is 83-percent black -- is African American.