Orr lays out his reasons for Detroit bankruptcy filing - New York News

Orr lays out his reasons for Detroit bankruptcy filing

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DETROIT (WJBK) -

Detroit on Thursday became the largest city in U.S. history to file for bankruptcy, as the state-appointed emergency manager filed for Chapter 9 protection.
 
Kevyn Orr, a bankruptcy expert, was hired by the state in March to lead Detroit out of a fiscal free-fall and made the filing Thursday in federal bankruptcy court.
 
A number of factors -- most notably steep population and tax base falls -- have been blamed on Detroit's tumble toward insolvency.  Detroit lost a quarter-million residents between 2000 and 2010. A population that in the 1950s reached 1.8 million is struggling to stay above 700,000. Much of the middle-class and scores of businesses also have fled Detroit, taking their tax dollars with them.

Orr provided a document (Recommendation Pursuant to Section 18(1) ofPA 436) to State Treasurer Andy Dillon and to Governor Rick Snyder: 

Orr's letter of recommendation for bankruptcy begins with this explanation:

Since my appointment as Emergency Manager, I have endeavored to keep you ,informed
of all of my activities to address the financial emergency faced by the City. In addition to
providing the reports required by PA 436, I have maintained open lines of cOlllmunication with
both of yon and the members of your staffs relating to the progress of my restructuring efforts
and the challenges I have faced in that process. I believe that both of you have been well
informed of the City's financial condition and its restructuring activities and negotiations that
have been pmsued to date, including those efforts that began before my appointment.


Nevetheless, to support my recolllmendation, this letter: (a) provides a brief background on the dire situation faced by the City; (b) summarizes certain of the efforts taken to date to rectify the City's financial emergency; and (c) concludes by discussing the need for chapter 9.
Based on the current facts and circumstances, I have concluded that no reasonable
altemative to rectifYing the City's financial emergency exists other than the confirmation of a
plan of adjustment for the City's debts pursuant to chapter 9 of the Bankruptcy Code because the City cmIDot adopt a feasible financial plan that can satisfactorily rectifY the financial emergency outside of a chapter 9 process in a timely matmer.

Based on the current facts and circumstances, I have concluded that no reasonable
altemative to rectifYing the City's financial emergency exists other than the confirmation of a
plan of adjustment for the City's debts pursuant to chapter 9 of the Bankruptcy Code because the City cmIDot adopt a feasible financial plan that can satisfactorily rectifY the financial emergency outside of a chapter 9 process in a timely matmer

The City is in the midst of a severe financial emergency. After decades of fiscal
mismanagement; plummeting population, employment and revenues; decaying City
infrastructure; and deteriorating City services, Detroit today is a shell ofthe thriving metropolis
that it once was.

Basic infrastructure is failing, such as the City's streetlights, many of which do not work. Crime is endemic. The City is plagued by blight and a diminishing quality of life. City operations, ordinances, policies and procedures must be streamlined and overhauled to
implement best practices and eliminate waste and inefficiencies.

Related to this, the City's technology systems, none of which are integrated, arc in desperate need of upgrades, as they have been neglectcd for years. The lack of modem systems undermines many of the initiatives to establish essential improvements to City services and reduce operational costs.

For an extended period of time, the City has simply failed to make the investments
required to provide its residents with an adequate quality of life, as limited resources have been diverted elsewhere. The City's urgent need to address large and growing legacy liabilities, and other substantial debts, is self-evident.

Failure to address these liabilities will prevent the City from devoting sufficient resources to providing basic and essential services to its residents.

Indeed, significant additional resources are required to improve public health and safety.
The City must devote a larger share of its revenues to: (a) effectively provide basic, essential
services to current residents; (b) attract new residents and businesses to foster growth and
redevelopment; and (c) ultimately begin what will be a long process of rehabilitation and
revitalization for the City. The City's debt and legacy liabilities must be significantly reduced to
pennit this reinvestment. Failure to do so directly endangers the health, safety and welfare of all residents of the City.

READ THE FULL LETTER OF RECOMMENDATION FOR FILING BANKRUPTCY, CLICK HERE.>>

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