Kevyn Orr, bankruptcy expert, named Detroit emergency manager

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DETROIT – What had been threatened for years and expected for months finally happened as Michigan Gov. Rick Snyder recommended Kevyn Orr, a Washington, D.C. attorney, for emergency manager for Detroit. The state’s emergency financial assistance board unanimously approved Orr an hour later making Detroit the largest city to fall under emergency management.

“I don’t view this as an act of isolation,” said Snyder, who was flanked by Orr and Detroit mayor Dave Bing. “This is not about asking one individual to come in and turn around the city of Detroit. This is about a situation of where when you look at the history of the city evolving for 50-plus years. This is a problem that now has reached a true crisis point.

“In many respects, it is a sad day, but I view this as an opportunity to work together; to bring people together as Detroit, Michigan. This is not about asking someone to step aside. This is about all hands on deck.”

Orr, who will resign from his law firm – Jones Day – effective immediately, has practiced law since 1984, specializing in business restructuring, financial institution regulation, and commercial litigation. Most notably, he oversaw the bankruptcy restructuring of Chrysler in 2009.

“I’ve represented corporations for a number of years and they are much more adversarial,” Orr said. “I’m just trying to get as much as I can, I don’t care what happens to the other side. They’re my adversary. This one’s a little different.”

Orr, 54, will start as the emergency financial manager on March 25 then become emergency manager on March 28 when the state’s modified emergency manager law, Public Act 436, takes effect. Orr, a University of Michigan graduate, will move from Maryland to Detroit to take the job and be paid $275,000 per year.

“Detroit is a great city,” said Orr, who noted that Detroit would be “the Olympics of restructuring” jobs. “There are people who throw themselves on live grenades to save their comrades. I’m asked to come into a civil city and sit in an air conditioned office and restructure a balance sheet. How could I say no?”

As emergency manager, Orr will be able to cancel or modify labor union contracts and potentially sell city assets with the governor and state treasurer’s permission. He can also act as a sole entity in collective bargaining, but cannot raise taxes and can be challenged by the city council.

With the city’s $14.9 billion in long-term debts and liabilities, Orr will also be able to use his bankruptcy experience to negotiate with creditors to pare down the debt.

The emergency manager has been hotly debated throughout the country and is seen by detractors as an attempt to disenfranchise voters and eliminate democracy in the city. Some protesters even insist that the city is not in any financial danger and this is a plot to cease control from the people and that the process is racially motivated.

“Folks will do whatever they need to do to get their voices heard,” said Rev. Charles Williams, the head of the Detroit branch of the National Action Network. Williams is advocating for nonviolent civil disobedience, including blocking Orr’s entrance into the City County Building and slowing down traffic on Detroit highways.

“We’re not going to demonstrate and go way,” Williams said. “We’re going to stand up for democracy. An emergency manager is anti-democratic and a challenge to voting rights.”

Prior to the announcement, a Lansing judge stopped an attempt to block the appointment. The lawsuit was filed by a group called Citizens United Against Corrupt Government.

Ironically, the head of the organization, Robert Davis, is under federal indictment for allegedly stealing public funds and creating a fake nonprofit organization while serving on the school board of nearby Highland Park. Orr is largely unfazed by the protests, noting that he is used to not being welcome in bankruptcy situations.

“One thing that’s not recognized is that I’ve been a Democrat all my life,” said Orr, who worked with the voter protection campaigns for John Kerry and President Barack Obama, as well as Obama’s Mid-Atlantic finance committee. “I’m a strong believer in people’s rights to peaceably assemble and, as long as it’s civil, they’re exercising their democratic rights. I’m not concerned about (the protests) at all.

“In my business, I’m sort of like the undertaker that walks up to the front door. I’m rarely welcome. I’ve been inoculated against the concept that people aren’t exactly happy to see me.”

The common criticism of emergency manager laws in Michigan is that they have not worked anyplace else. Detroit joins a long list of cities including Flint, Pontiac, River Rouge, and Benton Harbor.

“There’s a mixed record (on emergency managers) and part of that is due to history,” Snyder said, noting that in certain cases, emergency managers had been around too long. “We going to continue to work on that path to see how we’re going to get out of these cities and also make sure there is a plan for long-term success.

Orr’s appointment will be up for review in 18 months. At that time, under PA 436, the City Council could vote to keep him or go in a different direction. Orr confidently said that he could get the job done in 18 months, noting that federal budget issues have been hashed out in a fraction of the time.

He faces a tall task of helping to restore vital services such as public safety and working streetlights. A report from the U.S. Census showed that the city – which had already lost 250,000 residents, from 2000 to 2010 – continues to lose residents, down to 678,000 people. Years of government gridlock, bickering, and corruption have aided in the city’s fall.

“The financial crisis did not start four years ago,” Bing said. “People who were in key positions did not make the tough decisions. Everyday, when I get up and go into the office, I know what my challenges are and I find new challenges. Bottom line here, is that we must stop fighting each other. We must start to work together. I now know that I’ve got teammates.”

The one thing that everyone is trying to avoid is bankruptcy. According to the state’s financial review team, Detroit is currently $327 million in debt – a number that would be closer to $1 billion dollars if the city had not issued debts to pay off bills – and would be the largest American city to fall under Chapter 9 bankruptcy.

“Let’s get at it and work together and resolve this in good faith.” Orr said. “Don’t make me go to the bankruptcy court. You won’t enjoy it.”

Jay Scott Smith is a Daily Beast and Newsweek contributor who has previously written for the Detroit News as well as appeared on MSNBC, NPR, and ESPN Radio. You can follow him on Twitter @JayScottSmith.