DETROIT (Reuters) - The Detroit City Council on Tuesday approved a controversial contract to restructure the city's debt, despite a protest that temporarily shut down the meeting.
About 2 dozen protesters opposed to Michigan Governor Rick Snyder's appointment last month of an emergency manager to run Detroit linked arms and sang protest songs, forcing Council President Charles Pugh to call for a recess that lasted 90 minutes.
The council reconvened after about a dozen police officers moved into the chamber and threatened to arrest anyone who became unruly.
In a 5 to 2 vote, the council approved a six-month, $3.4 million contract to hire the Jones Day law firm, the former employer of Emergency Manager Kevyn Orr, to help negotiate agreements with creditors.
Under Michigan law, Orr has the final say on contracts for the cash-strapped city.
Jones Day's selection as the city's restructuring counsel was announced by Mayor Dave Bing on March 11, just days before the governor tapped Orr to run Detroit.
Both Orr and Snyder have said talks with creditors were needed to help solve Detroit's fiscal mess, which mushroomed as the city's population dropped along with its revenue.
Bill Nowling, Orr's spokesman, said no meetings with the city's bondholders have been scheduled.
"We will have more to say about concessions sought when we enter into negotiations," Nowling said. "Right now, it would be premature to comment."
Detroit has about $2.4 billion of outstanding general obligation debt, $6 billion of water and sewer revenue bonds and unfunded liabilities of $6 billion for retiree healthcare and $650 million for pensions, according to a March report from the mayor's office.
The city also faces paying as much as $440 million, or about 22 percent of its annual operating budget, after a credit rating downgrade last year and more recently the appointment of an emergency manager triggered the termination of interest rate swap agreements.
Nowling said Michigan-based law firm Miller Canfield will continue to negotiate with swap providers.
In the wake of the council meeting, protesters pledged to heighten the intensity of the demonstrations. Since the emergency manager was named, protest threats have mostly not borne out and there has been no violence.
"This is just the beginning. They haven't see the worst of it," said Rev. Charles Williams II, the head of the Michigan chapter of the New York-based Rev. Al Sharpton's National Action Network of community activist. "We are serious about this."
Among the concerns raised about the contract was perceived conflicts of interest. Protesters said Jones Day's clients include big banks that are Detroit creditors and stand to lose a lot of money under bankruptcy or a settlement.
Tensions flared late on Tuesday morning when Morris Mays, a 51-year-old Detroiter clad in a black leather jacket, black leather gloves, a black shirt, black sunglasses and gold chains threatened the council.
"I resent you. I hate you for what you did," Mays told the council for agreeing to work with the emergency manager. "I watch you attack us and attack us and attacks us. And I urge the people of Detroit to attack you!"
Police escorted Mays from the room. Others were forcibly removed after refusing to stay quiet.
(Reporting By Steve Neavling. Additional reporting by Karen Pierog in Chicago. Editing by Andre Grenon)
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