Detroit’s New Manager Must Make Basic Changes To Attract Business So Families Follow

There is a new sherrif in town in Detroit, the home of America’s home-grown auto industry. The Republican Governor of Michigan, Rick Snyder, chose Washington DC bankruptcy lawyer Kevyn Orr as emergency manager of the nearly destitute city, pushing the elected Mayor and City Council aside to see if one man with a license to kill corruption and mismanagement without having to build consensus can set the Motor City on a road to recovery.

The move by Snyder to take over Detroit is especially controversial. The voters of Michigan voted last November to do away with the Emergency Manager law, which allows the Governor to install a czar to take over the operations and finances of a city that can’t meet it obligations. But the Governor and state Republican led state legislature ignored the will of the voters and swiftly passed a new law to replace it.

If Snyder’s approach to state politics has been ham-fisted and partisan up to now, he is being much more nuanced in his move to take over Detroit. Orr is an African-American Democrat who worked on the Presidential campaigns of
Barack Obama and John Kerry. While Orr has the credentials to be an emergency manager, his race and party politics, the Governor’s thinking must be, will make his actions and moves more digestible by a largely African American populace (83%) in Detroit.

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What does the 54-year old lawyer say about the challenge of fixing Detroit? «It’s the Olympics of restructuring.» «If we can do this, I will have participated in one of the greatest turnarounds in the history of this country, and that is something I can tell my grand-kids about,» Orr said. «So it’s very inviting, very challenging.»

Detroit’s biggest corporate citizen
General Motors, whose multi-tower corporate headquarters dominates the riverside and the city skyline, went through bankruptcy in 2009. And while the company has roared back with healthy financial performance, the city of Detroit remains in a financial hole following decades of citizen exodus to the suburbs, corruption and mismanagement. The city that has a footprint to support two million residents has just 700,000 today, and far too many of those residents are either jobless, under-employed or on public assistance.

Mayor Dave Bing, a former Detroit Piston and member of the Basketball Hall of Fame, said he will not appeal the Governor’s decision to appoint Orr and that he will work with the University of Michigan graduate to fix the city. A bankruptcy is not certain for Detroit, but the appointment of a bankruptcy expert clearly shows it is a possibility. Orr starts work on March 25.

Orr’s appointment has been met with numerous protests, including people in cars purposely creating gridlock on the highways leading in and out of the city.

«When he signs into order an emergency management, he’s saying we don’t have a voice,» the Rev. W.J. Rideout III told the
Detroit Free Press. «When you’re telling me I don’t have a voice, you’re taking away my constitutional rights.»

Here is a rundown of what Orr has to deal with:

– 70,000 abandoned buildings

– $15 billion in long-term debt obligations

– That debt includes $5.5 billion in future healthcare liabilities to city employee unions and retirees.

– Bloated city bureaucracies

– Evaluation of city employee headcount. Detroit has laid off thousands of people over the last decade, but more are likely to go. The city had more than 17,000 employees in 2003 and about 10,000 in 2012. Expect Orr to cut office employees, and beef up police to improve public safety and crime prevention.

– There are simply too few gainfully employed families who want to live in Detroit and send their kids to the city’s over-crowded public schools. That is a terrible drag on the city’s tax base and neighborhood development.

– Unemployment in the Detroit-Warren-Livonia area, as tracked by the state, was one 10% at the end 2012. It’s higher in the City of Detroit.

– Thirty-six percent of Detroiters live under the poverty level, compared with 16% of people in the State of Michigan.

– The City’s bond rating has been in junk territory since 1992, which means they have to pay much higher rates on their debt than other cities.

– Violent crime per capita is worst in the country largely driven by gang crime and lack of police resources.


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