Michigan governor hopeful Detroit bankruptcy can be resolved quickly

Reuters News
Posted: Nov 08, 2013 2:33 PM
Michigan governor hopeful Detroit bankruptcy can be resolved quickly

By Dan Burns

NEW YORK (Reuters) - Michigan Governor Rick Snyder is optimistic that Detroit's bankruptcy case can be wrapped up during the remaining tenure of the emergency manager he installed to run the cash-strapped city, he said Friday.

Snyder, a first-term Republican, appointed bankruptcy attorney Kevyn Orr to an 18-month posting as the city's de facto chief executive in March, a role that effectively shoved aside the city's elected mayor and city council.

Then in July, with Snyder's approval, Orr filed the largest municipal bankruptcy in U.S. history, citing a mountain of debt and liabilities in excess of $18 billion.

Orr has said he expects to depart by September, 2014 at which point he also expects Detroit to emerge from bankruptcy. The federal judge presiding over Detroit's bankruptcy also has indicated he is seeking to move the case speedily through bankruptcy court.

Municipal bankruptcies are rarities, and a handful of recent cases have taken years to resolve. That raises the prospect that Orr's tenure may expire before the case he orchestrated is resolved.

Snyder, in an interview with Reuters during an economic development tour to New York, said that while he expects the city to opt to terminate Orr's role at the end of 18 months, he is hopeful that the case is proceeding quickly enough to allow it to conclude before that deadline.

"We are on a path to get it done within that time frame," Snyder said.

U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the case, "actually moved the schedule up in terms of being more aggressive, so we are on a path to getting it done," the governor said.

Should Orr still be in place when the initial 18-month appointment expires, Detroit's City Council could ask the governor to remove the emergency manager from office.

Snyder's comments on Friday came just as Rhodes was hearing closing arguments over whether Detroit is in fact eligible to seek Chapter 9 bankruptcy protection, a crucial phase in the contentious case. A number of the city's creditors, including current and retired employees and their large pension funds that account for a large portion of the city's liabilities, have objected to the bankruptcy filing.

No matter where the city is in the bankruptcy process at the time of Orr's departure, Snyder said it is important that the transfer of power back to the city is well executed. Orr was installed under emergency powers granted to the governor under a state law enacted in late 2012.

"I think there is a good question to ask what happens after he leaves, even assuming the bankruptcy gets wrapped up," Snyder said. "One of the important things is we need to work out the appropriate transition period."

Earlier this week, Detroit voters elected Mike Duggan to be the next mayor, a role with little authority during the remainder of Orr's term but one with enormous responsibilities after Orr leaves.

Snyder said he and Duggan had spoken since Tuesday's election, as have Duggan and Orr. Duggan, formerly the head of a Detroit hospital who will be the city's first white mayor since 1974, has "a strong background," Snyder said. He would not comment on the substance of their conversation.

The city has seen its population shrink to about 700,000 now from 1.8 million in the 1950s, when Detroit's three automakers dominated the industry. In recent years, the city has made international headlines with its urban blight, roaming packs of feral dogs and outdated and sometimes inoperable police and fire equipment.

Snyder said the city has made recent progress fixing some of the symbols of its blight, including a recent effort to repair many of its thousands of broken street lights.

(Reporting by Dan Burns; Editing by Leslie Gevirtz)