The restructuring plan includes pension and retiree health care cuts, offering some creditors less than 10 cents on the dollar and an abrupt decision to stop paying unsecured debt so the city can fund essential services. Orr also said he wants to spin off the city water department to a regional authority.
“We are tapped out,” Orr told reporters following the nearly three-hour meeting at a Detroit Metropolitan Airport hotel.
Orr pegged the odds of a Chapter 9 bankruptcy filing at “50/50” after urging about 150 officials from banks, bondholders, pension funds and unions during a closed-door meeting to accept concessions that would slash the city’s $17 billion debt.
The budget moves and concessions would let the city spend $1.25 billion in the next decade buying police cars and fire trucks, replacing broken street lights, tearing down burned-out homes and creating a new way of life in Detroit.
“The normal that we have gotten used to is going to change,” Orr said. “This is not a steady state. The city can thrive and survive.”
Orr’s pitch was met with disgust from city union leaders, fear from retirees who face possible pension cuts and, privately, resistance from some secured creditors who scoffed at agreeing to concessions when they might fare better in bankruptcy court.
“It’s a very aggressive first proposal from the city. I think the city is acting as if it’s already in Chapter 9 bankruptcy,” said Matt Fabian, managing director of independent research firm Municipal Market Advisors in Cambridge, Mass. “I don’t think there’s any difference.”
