Orr: Duggan, City Council are ready to run Detroit

By Matt Helms

Detroit Free Press


(MCT) — A year into Detroit’s historic bankruptcy, emergency manager Kevyn Orr says Detroit’s mayor and City Council are ready to run the city once his tenure ends in September.

Orr said he’s impressed with the focus of Mayor Mike Duggan and council members on improving the city and putting aside the deep divisions apparent during the first months of Orr’s tenure.

The battles between the mayor’s office and council members have all but disappeared, and differences between Orr and city officials are largely handled privately. Orr has gradually handed back responsibility for day-to-day operations to the mayor and council. To be sure, there will be a financial advisory board in place for at least 13 years, but the mayor and council will be running the city.

“If that focus continues, there’s no reason they shouldn’t be the right crew,” Orr told the Detroit Free Press in an interview last week. “It’s all sort of come together. I can’t imagine why they wouldn’t be able to do that.”

With a year of bankruptcy behind him, Orr said city government should operate in the future like most any big city. But like New York and others that faced years of oversight, Detroit will operate with state oversight to ensure a healthy balance sheet and to keep excessive borrowing and spending in check.

Duggan said Saturday that the “relationship between Kevyn Orr and me has been professional and without drama, and I’m expecting the transition to be professional and without drama.”

A year ago, Orr’s pronouncement seemed unlikely as he faced intense criticism for essentially sidelining then-Mayor Dave Bing and the previous City Council amid open criticism of Orr’s appointment.

The new cooperative tone is just one of the unexpected ways the bankruptcy has played out. The case has moved extremely fast through federal court, aided by a no-nonsense approach from U.S. Bankruptcy Judge Steven Rhodes, who has not tolerated legal gymnastics and delays. He has stuck to a fast schedule, despite Detroit’s Chapter 9 case being “bigger and more complicated than any other in history — it’s beyond unprecedented,” said Wayne State University bankruptcy law professor Laura Beth Bartell.

The unusual political and community support for protecting pensioners and Detroit Institute of Arts masterpieces also has kept time-consuming legal fights to a minimum. The bankruptcy case was odd from the start because it involved a state-appointed emergency manager with absolute power over city finances, including union contracts.

Soon after the July 18 bankruptcy filing last year, many predicted a drawn-out legal battle lasting years. There were warnings of dire consequences for all creditors, particularly pensioners. There were doubts Detroit could emerge from bankruptcy without an enormous federal bailout and ominous predictions of state oversight for years on end.

The reality was much different — a streamlined bankruptcy that could wrap up in less than 18 months, and widespread support for a settlement that came about, in large part, through something few anticipated: a successful mediation effort. That mediation produced an unprecedented deal — known as the grand bargain — among a group of wealthy foundations, state lawmakers and the DIA to donate hundreds of millions to offset pension cuts and protect city-owned art from the auction block.

During the past 12 months, there have been twists and unanticipated outcomes in Detroit’s historic bankruptcy.

From mayor to council, cooperative spirit

After two years of infighting between the mayor and City Council, new city legislators elected two-term member Brenda Jones as council president. For the first time in recent memory, council spoke with a unified voice as they built relationships with the newly elected mayor and Orr.

Duggan campaigned as the candidate fighting for control, the guy who would show Orr the door. Jones, among the most reliable critics of state intervention, underwent a transformation, emerging a quieter, yet more methodical critic, still voting as she saw fit but concerned equally with reversing city government’s reputation as uncooperative and plagued by infighting.

“I’m still council member Brenda Jones, but I’m also council president, meaning that I’m there representing the council as a whole, and when you’re representing a body as opposed to one person, it’s a total difference,” she said in an interview last week. “I’m there as an at-large member. I’m representing the entire city.

“As a whole, the council has transformed,” she said. “We are working as a team cooperatively. And I think we’re a good team.”

She credits Duggan for listening to her suggestions that he establish regular, informal contacts with the council. She and the mayor talk frequently, she said, something previous mayors didn’t do.

Duggan said Jones hasn’t given up on long-held principles, noting she voted against the deal for a new Detroit Red Wings hockey arena and for privatizing city trash collection.

“I don’t think she’s a different person,” Duggan said, “but I made it a point to consult with her on every significant issue, get her input ahead of time, and when people’s thoughts and ideas are included they tend to be more supportive than when they’re ignored. So I think what’s changed is she’s being treated with respect, and I think she’s responding as her colleagues are being treated with respect.”

Duggan says he remains opposed to Detroit having an emergency manager, but he had to recognize a political reality.

“I said during the campaign I was going to work with the emergency manager; there was no practical choice,” he said. “So if I wanted to have an impact on the streetlights and the blight and the fire and the buses, I needed to work cooperatively. I wasn’t happy with the relationship, but it was the best arrangement I could get, and I think Kevyn Orr and I have made it work professionally.”

Political analyst Greg Bowens, who was a spokesman for former Detroit Mayor Dennis Archer and who worked with a super PAC that last year supported Wayne County Sheriff Benny Napoleon for mayor, said Duggan, Jones and the council are engaging in what he calls “the smart politics of now.”

“They probably still don’t like the emergency manager law and would get rid of it if they could,” he said. “But once you win an election you have to learn how to govern. This particular strategy … is politics at its best in terms of getting out from under the yoke of the emergency manager and not giving the state any reason to clamp down any harder.”

A chance meeting, a grand bargain

Considered a life jacket for pensions and the DIA, the grand bargain came from a chance meeting between a judge and a leader of a major foundation.

Rhodes appointed Chief U.S. District Judge Gerald Rosen to oversee mediation between the city and creditors. Rosen bumped into Mariam Noland, president of the Community Foundation for Southeast Michigan, at a Detroit deli last fall. As Rosen tells the story, Noland asked casually whether there was anything she could do to help.

After weeks of negotiations, Rosen persuaded major philanthropic groups to contribute more than $350 million. The foundations, and eventually state government and the DIA, agreed to pay the equivalent of $816 million to lessen pension cuts in exchange for transferring the museum to a nonprofit trust that would shield its artwork from being sold.

But for the money to become available, all retirees must approve Orr’s bankruptcy plan, which still includes some pension cuts even after factoring in the $816 million infusion. Orr said the grand bargain money, like manna from heaven, saves pensioners from much deeper cuts.

Voting on the plan closed Friday at 5 p.m. Early indicators are that retirees and active workers voted strongly in favor of the plan. Orr said official results won’t be released until July 21.

“I think that the retirees and active workers are more astute than some critics have given them credit for. You tell any retiree, ‘Look, we have $816 million here in hand, and if we don’t get approval for what we propose to do with it, it will go away.’ That’s a pretty easy equation to work your way through. … We weren’t talking about $816 million seven months ago. We didn’t have it.”

While the mediation efforts led by Rosen have produced other significant settlements, the grand bargain changed the tenor of the bankruptcy, said Wayne State’s Bartell.

“The one-two punch of Judge Rhodes and Judge Rosen on his team has been brilliant,” she said. “What they have achieved so far has been remarkable.”

Under Orr’s plan, police and fire retirees won’t see their checks reduced, but cost-of-living adjustments are reduced by half. General retirees face 4.5 percent pension cuts with cost-of-living adjustments eliminated.

Pensioners have seen significant cuts to health care benefits, and general retirees who participated in an annuity savings program are being asked to pay back what the city says were excessive interest payouts. So, even with the grand bargain money, retirees face a major blow.

Face-to-face talks with state lawmakers

Duggan and the council also found receptive audiences among state lawmakers this summer as they lobbied for bills to crack down on scrap metal theft, a driving force behind malfunctioning streetlights and properties gutted beyond repair.

Then came the biggest vote. Largely bipartisan majorities approved the state’s share of the grand bargain: $195 million. Part of that legislation also involved long-term state oversight of Detroit post-bankruptcy. Duggan and council members persuaded lawmakers to shorten the term to 13 years from 20, provided the city maintain sound financial footing.

Longtime political analyst and pollster Steve Mitchell said last week he believes the cooperation between the city and outstate lawmakers has staying power. He said Duggan, a Democrat, and Republican Gov. Rick Snyder are getting along in the same way the late Mayor Coleman Young and Republican Gov. William Milliken formed a respectful rapport throughout the 1970s.

Duggan deserves credit for being a “very savvy mayor who’s used to building consensus, and therefore his ability to do that has worked with both the council and the Legislature,” Mitchell said. “And by building a consensus, I think it will last.”

Duggan and Jones said they’re committed to keeping the relationships they’ve developed with state lawmakers in both parties.

Jones said she was glad to meet with lawmakers face-to-face to explain the impact of the legislation they were considering.

“Being able to talk to them made a big difference,” she said. “Moving forward, what I’m hoping is that we will continue the relationships.”


Posted by Tribune News Services