Kevyn Orr, the Washington, D.C. bankruptcy attorney named by Governor Rick Snyder as the Emergency Financial Manager of Detroit beginning March 25, said during an exclusive interview with Bankole Thompson, editor of the Michigan Chronicle, that everything is on the table to get Detroit’s finances straightened out. That includes bankruptcy, city assets, pension funds, retiree benefits, city creditors and every other stakeholder tied to the financial wellbeing of the city.
Following are excerpts from that interview.
MICHIGAN CHRONICLE: What is there about you that we don’t know?
KEVYN ORR: Not much at this point. It’s really not much about me. I’m just a guy who had the good fortune of falling into a couple of jobs that led me to restructure and practice and has me here. So really it’s not about me. It’s about somebody who can come in to do the hard work of looking at the numbers, statutes, making decisions but also being sympathetic to the fact of real world impact. That’s what it’s about.
MC: You said that this is the “Olympics of restructuring.” Is this the biggest assignment for you so far?
KO: Not in dollar value. We’ve done bigger cases. The reason I say it’s the Olympics of restructuring is most Chapter 11 restructurings have to do with taking a business that’s in crisis, coming up with a reorganization plan to restructure, getting stakeholders to agree to a structure that works and getting that plan voted on and the operating system running it again.
The thing that’s different here and is different in Chapter 9 definition is there is a bystander as the citizens and the constituents of a municipality. In a sense the balance sheet aspect of what we have to do is pretty straightforward as I keep saying. The math is the math: maintaining city services, dealing with efficiencies, addressing people’s fears and anxiety, public safety and the employees. Detroit is one of the largest employers in Wayne County, if not the largest.
That’s what makes it so difficult and doing that in an environment where you recognize what you do is going to have consequences to people.
When I’m in a business deal, this is business. This isn’t personal. There is some single mother out there who is gets up at 4:30 a.m., gets on a bus, drops her kids off on the way to her first job at 3 p.m. She has a14 year old who is going to take care of her 12 year old and 7 year old. She gets home at 9 p.m., tired, hopefully they haven’t got in trouble, get something to eat, their homework. She starts it over every day. I recognize that’s a hard way of living.
That’s how my grandparents live.
MC: So what about a single mother who’s skeptical about city services because she has in the past had no EMS service, inadequate public safety?
KO: To that person just an awareness that we’ve got to improve city services, to put these lights up because there’s a difference between October and May. Kids walking to school in the dark, that sort of thing. That’s the person I’m really talking to when I say the Olympics of restructuring because it’s not just on the business angle, it’s really the substance here.
MC: You sounded a consensus note in your first press conference. What would you specifically asked the Detroit City Council to do?
KO: I want to cooperate with city council. I’m emergency financial manager. I’m not an elected official. Council are the representatives of the people. They know their constituencies. They live here. I’m the guy coming in from outside. I think they have a very real and very substantive role to play both in communications and also recognizing my time frame is fairly short. I’m going to gone someday.
There are still going to be council people, mayor. In fact, if I get this done quickly enough they get to dimiss. So what I want from them? I want cooperation. I want them to be partners with me in recognizing this is not easy, not their preferred route but partnering with me in getting this job done. That’s what I really want.
MC: You are a successful lawyer. Stepping into this role, you are also stepping into history. This is now part of the Kevyn Orr legacy. How much impact does that have on you as you begin March 25?
KO: It really doesn’t because the reality is my life’s been a process of sort of getting opportunities and taking care of them. And each time I just try to do that job. That’s what I’m focused on. There is a task in front of me. It’s a hard task and whatever comes from that hopefully will flow from having success with that task. The broader process of history and all that context, I can’t even focus on that right now.
MC: You’ll let historians decide your legacy in Detroit?
KO: You know historians will always decide that. It’s up to them. I just want to get this job done.
MC: How would you tackle retiree benefits?
KO: I’ve always said this is going to be data driven. I have to look at inflows and outflows of the city with some of the data regarding the city’s debt service, retiree benefit service, long-term obligations, under state law. I have to look at that and see, frankly, an analysis of what needs to be done so that we can put this city on a sustainable path for growth and development going forward.
Obviously you are going to want an inventory of all of the various components of the employee, retiree benefits and compensation sides, the debt service and city service. I hope what I do is get some data that sort of informs my approach and concern, and approach the stakeholders in this case with an effort to try to negotiate some adjustments that may be necessary.
MC: How would you bring creditors to the table in addressing the fiscal crisis?
KO: To a degree the creditors have already been at the table. There has been forbearance agreements, just the declaration that Detroit is in an emergency situation and the appointment of an emergency financial manager might be in some circumstances covenant default. I understand there’s been ongoing negotiations with creditors. I saw some blog, I’m not a defender of the banks. So everybody calm down and then we’ll approach it in a very deliberate process.
It doesn’t matter whether it was me or someone else. Creditors know that something has to be done because the current path simply isn’t sustainable.
MC: You’ve said Mayor Dave Bing is going to be your partner in this. What’s your impression of him?
KO: First of all, I have to acknowledge that Mayor Bing is a historical and iconic figure in the country’s history, a great basketball player. I was actually very interested in meeting him. He’s inducted into the Hall of Fame. And watching history, Mayor Bing was drafted to run for mayor. He’s done very well for himself and hadn’t bothered anyone. And given the circumstances at the time of the prior mayor, he stepped into the frying pan. So I view him as a very courageous figure. I think it was very commendable of him to decide to become a partner at some risks and criticism from his own colleagues. So I’m very impressed with the mayor and the mayor’s courage. I look forward to working with him.
MC: The elephant in the room is bankruptcy, and it’s being talked about many times. Explain what would trigger bankruptcy for you?
KO: You’re right. The elephant in the room is bankruptcy. And I really mean what I said. If we are able to work on this collegially we can avoid a bankruptcy filing. Good parties in good faith can agree to anything that they want to. What would make me consider bankruptcy? Some of them might be consensual. Oftentimes in certain plans of reorganization, parties enter what’s called “pre-pack,” a deal that everyone has essentially agreed to or the majority of stakeholders have agreed to.
Maybe some outliers, they feel that by going through the bankruptcy process they’ll get the overlay of the court’s approval, they’ll get the court’s jurisdiction to enforce the terms of the package that they need as fiduciaries to make a decision. So sometimes it’s not that there has been a strong carmel’s back that makes a bankruptcy filing, it could be that strategically for all parties it is something they want to do in a quick way. That happens quiet frequently.
MC: What role would the federal government play here given your role as a former member of President Obama’s 2012 campaign finance committee?
KO: I’ve worked with the campaign. I know people in the administration. I don’t know if I’m closer to them on that level. I think certainly he is president of the United States. I don’t know if that gives me any opportunity to request federal help than anyone else in other cities.
MC: Have you gotten calls from the White House?
KO: No. I would like to think that we might have the ability to receive some federal help in some fashion. I don’t want to try to guesstimate it, presage it. There are many programs out there we already may be receiving some funding for. I think it’s fair to say that given Detroit’s position in the world and the status, that this is a significant matter worthy of attention.
MC: Detroit in the past has received federal dollars in grants that were returned unused. How would you deal with that?
KO: Part of the analysis is what tools and opportunities we have available that we haven’t been using. I would hate to see the city having received grants and haven’t found a way to use them. I’d certainly look into that.
MC: What was instructive in the Chrysler bankruptcy process?
KO: People keep going back to Chrysler. We have to remember that Chrysler was a private sector deal. This is different. Chapter 9 is different. What struck me at Chrysler, frankly, was the ability of the parties, even adversaries, to work together quickly and efficiently, and the ability of the federal bankruptcy court system to administer that case in a record-setting time. From filing of the case to the sale, the reorganization of the company was 42 days. That was pretty exceptional. Now past performance is no guarantee of future outcomes.
MC: Comparatively speaking, how does the financial crisis that hit New York and Baltimore fit in the Detroit equation?
KO: Well, I see a group of concerned people coming together, focused in good faith, really attentive in terms of trying to make a decision as far as what you do for the interest of the city, and then executing on it and having results. I’m in no illusion that the long-term problems we need to deal with — growing the city, city services — are going to happen in 18 months. I’m just merely an architect trying to design a process that can be put in place to make it sustainable so that the inheritors of that process, the elected officials that come later, will take that up and have the ability to achieve the results we’ve seen in Baltimore, Pittsburgh and other cities.
MC: Let’s talk about generating revenue for Detroit.
KO: Well, I think everything is on the table for me as emergency financial manager. Certainly looking at ways, cashiering, collection, looking at ways that we can generate revenue is part of the job.
MC: Now let’s discuss city assets. Part of the criticism about your appointment is that it is believed you are here to sell Detroit’s assets, like the Detroit Water and Sewerage Department. What do you say to that?
KO: Well, I think I said everything is on the table. I think I’ve also said we’ll try to use the data to make reasoned decisions that provide a net benefit to the city. If you look at a city that is cash strapped in and can’t get things done in certain ways. If you have the opportunity to enhance the revenue stream from existing assets without loosing that asset, you have to examine that. At least be open to the concept. If you can generate from a system $50 million in net cash flow per year, in ten years that half a billion dollars. That’s a lot of money. So everything has to be looked at.
But I’m sensitive to the fact that people are very concerned about an emergency manager coming in selling everything off. But there may be ways to increase value (of the assets) for the benefit of the city.