The state-appointed emergency manager for the city of Detroit, Kevyn Orr, tasked with managing the city’s debt windfall alongside of a team of experts, has arrived at the conclusion for eradicating Detroit’s debt. The city recently stated that it was defaulting on more than $2.5 billion in debt, but made a paltry offering to calm creditors: a meager 10 cents on the dollar to settle their accumulated debts.
Over a two hour period Orr, the emergency manager of this project, met with creditors, trustees and more than 180 bond insurers regarding the unapproachable debt ceiling that the city faces. The move is considered by many as a last ditch effort to avoid bankruptcy and further embarrassment. If Detroit files for bankruptcy, it will be the largest one in municipal history.
Pension claims that are underfunded would also get the ominous 10 cents on the dollar.
Furthermore, Orr also announced today that the city has ceased all payments on its unsecured debt. He stated that this was in attempts to “conserve cash” for more important operations like police and fire as well as other city services. Inclusive of that debt is $39 million the city owes for the certificate of participation.
“We will not pay that today,” Orr told reporters in a recent statement.
According to Orr, his proposal would fix all of the city’s financial troubles in a single swoop. He emphasized that the financial troubles that beleaguer the city were the result of cause and effect; years of ignoring dire fiscal problems that ultimately culminated in a devastating outcome.
“If people are sincere and look at this data, you would think a rational person will step back and say, ‘This is not normal … but what choice do we have?'” Orr said.
According to Orr, the city’s debt ceiling could peak the pinnacle of $380 million by mid-July. He further speculates that it could surpass a whopping $17 billion in the long haul.
Under the current proposed plan, a health care replacement program would drop from $40 million to just $27 million, and would rely upon additional funding and assistance from the federal Affordable Health Care Act, health exchanges and Medicare.
Orr also stated that about $1.25 billion would be saved from concessions to fund vital city services like public safety and lighting over the next decade.