Jun 142013
 

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Orr: Detroit to halt debt payments, reinvest $1.25 billion in city

Detroit emergency manager Kevyn Orr laid out an extraordinary, complex and painful path back to solvency for the City of Detroit Friday in a proposed plan to creditors that promises at the same time a way out of the financial mess that has crippled public services and a path for future growth.

Orr’s plan would spin off the city’s water department, reduce city-provided health care for retirees and current workers and immediately stop debt payments. The city missed a $39.7 million payment to an unsecured creditor on Friday. The money for such payments will instead be used to keep the city operating. Orr’s plan calls for reinvesting $1.25 billion over the next decade to boost crucial services like police and fire, step up blight removal and transform the operations of an antiquated, failing city government.

The impact of the document Orr released publicly and to creditors in a historic meeting this morning cannot be overstated.

Orr and his team discussed a staggering amount of liabilities — as much as $20 billion — Friday as they met with as many as 150 creditors called together in a bid to win an out-of-court settlement of the city’s financial collapse or, at least, a municipal bankruptcy proceeding in which most creditors would agree to deals before a Chapter 9 petition is filed.