Several months after filing for bankruptcy, Detroit has a plan to pull out of bankruptcy, while restructuring its $18 million debt.
State-appointed Emergency Financial Manager Kevyn Orr’s early plan of adjustment draft calls for pension cuts for city retirees while maintaining the city’s vibrant city-owned art, and cleaning up or demolishing aging neighborhoods, the Associated Press reports. Orr estimates that the city debt is at least $18 billion with about $12 billion in unsecured debt, meaning there is no revenue stream to cover the debt.
Orr plans to pay creditors 20 percent of their claims, and police and fire retirees would receive at least 90 percent. General city retirees are set to receive at least 70 percent.
The plan offers a promise of millions of dollars in a fund that includes donations from 10 private foundations, donors from the Detroit Institute of Arts (DIA), and a $350 million pledge from Michigan Governor Rick Synder to help the city’s pension plans. This fund, estimated at $820 million, would prevent the sale of multimillion-dollar city-owned arts pieces housed at the DIA.
Other highlights of the plan include leasing the city’s Water and Sewerage Department facilities to a regional authority that could bring in $47 million annually under a lease deal. In addition, the plan contains a disclosure statement that outlines a 10 year reinvestment strategy of $1.5 billion that will knock down abandoned properties and technology upgrades. Since the closing of many auto factories, Detroit is littered with old buildings that could be revitalized for homes and businesses.
Orr maintains that the plan “provides the best path forward for all parties to resolve their respective issues and for Detroit to become once again a city in which people want to invest, live and work.” The plan is set to be submitted to the U.S. bankruptcy court, which gave the city a March 1 deadline. Negotiations are ongoing with numerous appeals to be expected.
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