Following the State's takeover of Detroit's finances in March [5], it seems the end is growing 'nigh'er for the troubled city. According to the WSJ [6], Kevyn Orr, Detroit's emergency manager, plans to call unions and creditors to a meeting in mid-June to lay the groundwork for a bankruptcy within a matter of months. The meeting is designed to restructure the long-struggling city's liabilities of over $17bn and is an attempt to "have a mature and sober discussion" of repayment terms following its delayed payment in April of $226 million on pensions and other obligations. Several unions said they are willing to come to the table, but believe "it's a scare tactic." Up to now, Gov. Snyder and Detroit elected officials have said they want to avoid using bankruptcy (Detroit would be the biggest muni filing ever) to clean up the city's mess. But in recent days, their positions have softened, adding that, "I don't want to go to bankruptcy, but I do know that it is a strong possibility." Mr. Orr's office confirmed it was evaluating the potential sale of prized assets such as the artwork at the Detroit Institute of Art, a collection potentially worth billions.
Via The WSJ [6],
Kevyn Orr, appointed by Michigan Gov. Rick Snyder in March to take control of the long-struggling city, plans to use the meeting to present a detailed restructuring plan for Detroit's liabilities, which he says total about $17 billion.
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Over the coming weeks, Mr. Orr is expected to ask the city's largest unions, pension funds, creditors and bondholders for concessions. It is unclear whether such moves could stave off bankruptcy - or pave the way for it by serving as a template for a court-supervised reorganization.
A bankruptcy filing likely would be the largest ever by a U.S. municipality in terms of debt outstanding, surpassing that of Jefferson County, Ala.
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On average, since 2008, Detroit has spent $100 million more a year than it collected in taxes and other revenue.
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On June 15, the city is due to make a debt payment estimated at more than $30 million, according to a person familiar with the matter. It is possible Mr. Orr will decide not to make the payment to conserve cash
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Detroit had $64 million cash on hand in April but owed $226 million in payments on pensions and other obligations, forcing the city to delay paying its bills to stay afloat,
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Union representatives criticized city leaders for failing to implement cost-saving reforms. Some dismiss the idea that Mr. Orr might push Detroit into bankruptcy.
"I think it's a scare tactic," said Ed McNeil, assistant to American Federation of State, County and Municipal Employees Council 25 President Al Garrett, the city's largest union for municipal workers. "It's been something like six times that the city was going to go bankrupt. But it never happened and they never had a payless payday."
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Mayor Bing said in an interview last week, "I don't want to go to bankruptcy, but I do know that it is a strong possibility."
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Mr. Orr sharpened the debate about bankruptcy in late May when his office confirmed he was evaluating the potential sale of prized city assets, including the artwork at the Detroit Institute of Art, a collection potentially worth billions.