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Orr: Detroit’s financial creditors spreading ‘misinformation’

From: The Detroit News

By Chad Livengood

May 30, 2014

Mackinac Island — At an event showcasing bankrupt Detroit’s comeback, Emergency Manager Kevyn Orr issued a dire warning to state business and political leaders Friday about the tenuous nature of a deal engineered to limit reductions in benefits for 32,000 pensioners.

The usually confident Washington, D.C. bankruptcy attorney voiced concerns that a deal to prop up city pensions with state and private funds could unravel if retirees and existing workers reject the settlement or the state Senate refuses to contribute taxpayer resources.

Orr said he’s worried about a creditor vote underway that’s already been hampered by inaccurate ballots, a “misinformation” campaign being waged by financial creditors and a looming summer trial over his plan to slash Detroit’s $18 billion in debts in half.

“Despite the momentum we have going forward, we have some pretty significant milestones and some pretty motivated angry folks standing in our way,” Orr said at the last day of the Detroit Regional Chamber’s annual Mackinac Policy Conference.

A possible vote next week in the Senate on $195 million in aid is crucial to completing the bankruptcy “grand bargain” to aid pensioners, Orr said.

“Without the money, without the vote, we’re done,” Orr said. “We go back to the drawing board.”

Orr also expressed concern that some retirees and current workers may vote down the deal, triggering deeper cuts. His plan calls for no base cut for retired police officers and firefighters, but a reduction in their annual inflationary raises from 2.25 percent to 1 percent.

The city proposes a base 4.5 percent cut for general retirees and the elimination of cost-of-living increases. Those base pension cuts could swell to 27 percent or higher if that class of creditors rejects the deal, Orr said.

“This is not a game. This is not a time for protest votes,” Orr said. This is very serious business that could result in people being pushed to the poverty rolls.”

Orr accused “very ticked off” bond insurers of waging a “very concerted and focused campaign to undermine the proposal we have on the table.”

Facing hundreds of millions in potential losses, bond insurance giants Syncora Guarantee Inc. and Financial Guaranty Insurance Company have been pushing for a sale of city-owned art at the Detroit Institute of Arts, which Orr has resisted.

“I just learned yesterday that they’re sending packages to the financial press in New York, not just criticizing the proposal we have out, but providing misinformation about how unfair it is … and that if we sell the art it could result in a greater recovery for all creditors,” Orr said.

The bond insurers contend more money could be extracted from the DIA than the $466 million private foundations and the DIA have offered over 20 years, coupled with a $195 million lump sum payment for Detroit pensioners that state lawmakers are contemplating.

But Orr said proceeds of selling the DIA collection to the highest bidder would have to be shared evenly among $12 billion in unsecured creditors. The city’s plan gives the DIA “grand bargain” proceeds exclusively to pensioners and nearly wipes out some city bondholders.

“The reality is the very delicate proposal we have on the table to preserve the art goes away and the pensioners get less,” Orr said.

After the speech, Orr told reporters that early returns of ballots from pensioners show nearly two-to-one votes in favor of his Plan of Adjustment.

“Early returns seem to be supportive, but here again I’m taking nothing for granted in this process,” Orr said. “A lot of people are waiting until they see if the Senate funding comes in.”

Less than 15 percent of the pension ballots have been returned since creditor voting began May 12, Orr spokesman Bill Nowling said.

During his speech, Orr acknowledged that fixing Detroit’s municipal government and revitalizing neighborhoods won’t happen on his watch as state-appointed emergency manager.

“The real work that’s going to be done will have to be continued by the mayor, the city council, the governor and everybody in this room,” Orr said.

Orr’s speech followed a Thursday push by his boss, Gov. Rick Snyder, to try to rally support among the 1,600 conference attendees for state Senate passage of $195 million in state aid for Detroit pensioners.

Senate Majority Leader Randy Richardville has scheduled a Tuesday hearing on a House-passed 11-bill package that would provide Detroit the money while requiring continued state oversight of the city’s finances for at least 13 years.

Snyder has made completion of the “grand bargain” his top priority heading into June before lawmakers leave Lansing for their summer recess and the primary election season.

Detroit’s bankruptcy and urban renewal dominated Friday’s speeches at the conference.

New Orleans Mayor Mitch Landrieu delivered a keynote address ahead of Orr’s speech in the Grand Hotel’s theatre. Landrieu’s speech drew parallels between his hurricane-ravaged hometown and the Motor City.

Landrieu praised the plan to limit cuts to city pensioners with $195 million in state funds and $466 million over 20 years from twelve foundations and the DIA’s own fundraising.

“I like the plan because it requires everyone to be in,” Landrieu said. “It requires sacrifices from all.”