Today, EM Kevyn Orr announced the city would stop paying unsecured debt and dedicate $750 million for reinvestment. Orr says the money, in addition to a $5.5 million grant, will go to removing blight, investing in public safety including lighting, upgrading IT and technology to bring the city administration into the 21st century.
Orr says he hopes to refinance secured debt by giving creditors a note at 1.5 percent interest. All unsecured creditors will receive less — 10 cents on a dollar.
Detroit citizens should also expect changes with Detroit Water and Sewerage Department. Orr made these announcements before he met with creditors at the Detroit Metro Airport.
Kim Buckfire of Miller Buckfire, who explained the changes along with the Emergency Manager, said they had already met with counties that are customers of the water and sewer department to discuss a regional authority taking on the water department “subject to the city being fairly compensated. It’s very complicated, we are getting the numbers. Our fallback is not to sell the system.”
The newly formed water authority will have some representation from the city, according to Orr.
“All assets and secured debt” of DWSD will go to the new Regional Water Authority. An annual payment will be made to the city which means additional revenue. The Authority “will leave the legacy liabilities behind.” All pension benefits and OPEB (post employment benefits) obligations will be left with Detroit.
It is still not yet clear if employees and pensioners will take the biggest hit in the restructuring. Orr says all debt, in the same class, will be treated equally.
Detroit residents have the highest tax rate in the state and only get back 60 cents on a dollar in services.
“Serving legacy liabilities, which is why service is not what it’s supposed to be, is unsustainable,” said Orr.
Following his meeting with creditors Orr told the press that by June 20, he expects to have hard figures on the restructuring of pension and retiree health benefits.
There will be a new plan for retiree healthcare benefits.
The city will use a combination of Obamacare, Medicare and other unspecified programs to provide retiree healthcare.