Richard Ravitch, who helped New York weather its fiscal crisis in the 1970s, was named by the judge overseeing Detroit’s record municipal bankruptcy as a court consultant on that city’s debt-cutting plan.
U.S. Bankruptcy Judge Steven Rhodes in Detroit also appointed Martha Kopacz, a director at Phoenix Management Services LLC, to weigh the city’s plan to reduce $18 billion in debt, according to a court filing today.
Rhodes is scheduled to oversee a court battle in July between the city and its creditors over the debt-adjustment proposal. The judge said this month that he expects creditors to focus on whether Detroit can do more to pay them, leaving unaddressed the question of the plan’s long-term viability. Ravitch said he will advise Rhodes on whatever he’s asked.
“This is the largest municipal bankruptcy ever, and it’s complicated,” he said in a phone interview. “The only reason I’m involved at all is because I’d like to help. It’s a tough, complicated situation.”
Detroit claims that bankruptcy was necessary because, after years of population decline and the disappearance of manufacturing jobs, the city can’t afford to pay its debts in full and still provide minimum levels of service, such as police and fire protection. It has proposed cutting some bond payments and reducing pension benefits for some retired public workers.
A former lieutenant governor of New York state, Ravitch, 80, helped New York City avoid bankruptcy in the mid-1970s as an adviser to then-Governor Hugh Carey. He’s a partner in New York-based Ravitch Rice & Co.
Ravitch, who will work on the Detroit case as an unpaid non-testifying consultant, served as chairman of the New York State Urban Development Corp. and chief executive officer of the New York Metropolitan Transportation Authority.
Kopacz, as a paid expert witness, will be asked to reach a conclusion on whether Detroit’s plan is feasible and whether the assumptions that underlie its forecasts are reasonable, according to the court filing. She’s senior managing director of Chadds Ford, Pennsylvania-based Phoenix Management Services and has 25 years’ experience in business consulting and restructuring, according to the company’s website.
In 2011, she advised the Nassau County Interim Finance Authority, a New York state control board, on the nature and size of a likely budget deficit and the reasonableness of the county’s forecasts. The structural deficit for 2012 was estimated at $300 million, according to papers filed in court.
Kopacz said she won’t comment to the press until the Detroit bankruptcy is concluded.