DETROIT – The state-appointed emergency manager overseeing Detroit’s finances on Wednesday gave the bankrupt city’s creditors copies of his plan to restructure the debt, though it could be modified before being reviewed by a court.
Details of the plan were not released publicly. In a written statement to the media, Orr said the so-called plan of adjustment outlines how much each class of creditors would receive for claims submitted in bankruptcy court.
The plan is expected to be filed with the court in about two weeks, Orr said.
He said the plan “offers the most effective and efficient way for Detroit to resolve its numerous issues.” He originally had said the plan would be released in late December but moved that back as mediation continued with city unions, banks, a group representing retirees, and other creditors.
“There is much work still to do and we believe the proposed plan provides the roadmap for all parties to resolve all outstanding issues and facilitate the city’s efforts to achieve long-term financial health,” said Orr, who was appointed by the state last March to fix Detroit’s finances.
He filed the bankruptcy petition in July. Bankruptcy Judge Steven Rhodes approved it in December. It’s the largest municipal bankruptcy in U.S. history.
Experts have said the debt-restructuring plan likely will bear some similarities to a June 14 report laid out to creditors when Orr said Detroit was insolvent. He placed Detroit’s debt at $18 billion or more, including $3.5 billion in unfunded pension liabilities and $5.7 billion in unfunded retiree health care obligations.
“Time is of the essence,” Orr said Wednesday. “The longer we remain entrenched in our positions and fail to reach an agreement, the worse life gets for Detroit’s 700,000 residents and the greater our collective challenges become. My team and I believe this plan presents each interested party with fair and equitable treatment, and we look forward to working with our creditors to adopt this plan.”
Since filing for bankruptcy, Orr has proposed freezing pension benefits to thousands of city workers and reducing health care benefits, affecting about 28,500 current and retired employees.
Those actions were part of Orr’s preview to his plan of adjustment, said Michael Sweet, a bankruptcy attorney in Fox-Rothschild’s San Francisco office.
“He’s trying to get it out there in a way to make it digestible to people,” Sweet told The Associated Press earlier this month.
Another part of Orr’s plan likely will include the future of city-owned pieces in the Detroit Institute of Arts. An appraisal by New York auction house Christie’s determined that city-owned pieces in the museum have an estimated value roughly between $450 million and $870 million.
To keep the art from potential sale, a coalition of foundations and individuals has pledged $370 million to go toward pension benefits for retirees. Gov. Rick Snyder separately is trying to win approval for $350 million from the state. And mediators in bankruptcy court said Wednesday that the art museum plans to announce a $100 million fundraising effort.
All of that “likely means less of a hit to pensioners and the opportunity to keep important cultural assets within the community,” Sweet said Wednesday. “But it remains to be seen what the impact of these deals will be on the outcome of the city’s bankruptcy.”
The Police and Fire Retirement System received the plan about 3 p.m. Wednesday, said Bruce Babiarz, a spokesman for the pension system.
“The preliminary plan of adjustment is just that — a preliminary document that has been distributed to creditors,” said Babiarz, who would not discuss its contents due to the ongoing, confidential mediation sessions with the city.