Kevyn Orr Named Emergency Manager of Detroit by Governor

Michigan (STOMI1) Governor Rick Snyder named Washington lawyer Kevyn Orr as emergency manager to lead Detroit (9845MF) out of a financial crisis that threatens to make it the largest municipal bankruptcy in the U.S.

Orr, 54, previously a partner at Jones Day (1113L) who worked on the 2009 bankruptcy of the former Chrysler LLC, will tackle a city in a downward spiral of shrinking population and revenue, whose municipal government opposed a state takeover. Detroit’s deficit hit almost $327 million last year and its long-term obligations have grown to more than $14 billion, according to a recent state review.

Restoring fiscal stability to the city is “the Olympics of restructuring,” Orr said today at a news briefing. He said improving city services is his paramount goal.

Detroit becomes the sixth Michigan city with an emergency manager, though by far the largest. Under a new law that takes effect March 28, those managers will assume greater authority to operate and finance the municipalities. Those powers include the ability to sell assets and change labor contracts.

“We have great people who want to help,” Snyder, a 54- year-old Republican, said at the briefing where he was flanked by Orr and Mayor Dave Bing, a Democrat. “Now is the time to find common ground to solve the problem.”

Board Approval

Orr, who said he resigned yesterday from Jones Day to take the Detroit position, was formally approved for the job by a three-member state emergency-loan board in Lansing made up of Snyder appointees.

Orr, a University of Michigan law school graduate, has specialized in corporate restructuring and bankruptcy. He will be paid $275,000 a year as Detroit’s emergency manager.

Robert Davis, a representative of American Federation of State, County and Municipal Employees Council 25 in Lansing, told the loan board he would seek to block Orr’s appointment in court. The union led a campaign last year that repealed a previous emergency-manager law.

Orr said Snyder persuaded him to take on the task and that Bing would “be part of the solution.”

“As the Detroit motto says, ‘We can rise from the ashes,’” Orr said. “I feel compelled to take the job.”

Shrinking City

Snyder’s decision marks a historic turn for a city, an industrial powerhouse with 1.8 million residents in the 1950s that has shriveled to about 700,000 people in a sparsely populated 139 square miles (360 square kilometers). About 38 percent of the city’s lots are vacant or have unused buildings, according to Detroit Future City, an independent study.

Snyder declared Detroit in a financial emergency on March 1. On March 12, the Detroit City Council appealed, saying it had a recovery plan of its own.

Bing didn’t join the appeal. The mayor said March 11 that the city had hired Orr’s law firm, Jones Day, as restructuring counsel.

“We must stop fighting each other,” he said at today’s news briefing. “We must start to work together. I’m happy now I’ve got teammates, I’ve got partners to help me do what needs to be done in the city.”

“Today marks the beginning of bringing health back to the city of Detroit, and I’m proud to be part of it,” Bing said.

To contact the reporter on this story: Chris Christoff in Detroit at cchristoff@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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