Gov. Snyder Gives Detroit Control of City Back

by | December 10, 2014

By Matt Helms

Gov. Rick Snyder has signed off on ending Detroit's emergency status, signaling the end of the city's financial crisis and positioning it to officially come out of bankruptcy as early as this week.

Snyder sent a letter to emergency manager Kevyn Orr today approving Orr's recommendation that state receivership of the city be terminated. Snyder, in the letter, also accepted Orr's resignation as emergency manager.

Both would happen on the official day the city exits bankruptcy.

In a letter Monday to Snyder and state Treasurer Kevin Clinton tendering his role as emergency manager, Orr wrote:

"I believe that, upon the effective date of the Plan of Adjustment the financial emergency with the City will be rectified and I therefore can: (a) recommend that the receivership established pursuant to Public Act 436 be terminated and (b) relinquish my position as Emergency Manager."

Snyder, Orr and Mayor Mike Duggan will have a news conference Wednesday in Detroit to announce the city's status and what that will mean going forward.

The effective date of the plan of adjustment will depend on wrapping up loose ends of paperwork and agreements with creditors spelled out in the plan of adjustment, the official blueprint for operating post-bankruptcy and reinvesting up to $1.7 billion in city services and blight removal over the next decade.

In response to Orr's letter, Snyder said he agrees with Orr's assessment of the city's financial condition and thanked him for his service.

"I conclude that the financial conditions of the City have been corrected in a sustainable fashion as provided in Act 436...I hereby remove the city of Detroit from receivership as of the Effective Date of the Plan for Adjustment.."

Detroit's fiscal crisis brought on state intervention in 2012 when city leaders approved a consent agreement with the state that required financial reforms that, ultimately, weren't enough to stave off appointment of an emergency manager and later the filing of the nation's largest-ever Chapter 9 municipal bankruptcy petition.

U.S. Bankruptcy Judge Steven Rhodes approved Detroit's emergence from bankruptcy in early November, but the effective date -- when the city is officially considered to have exited Chapter 9 -- could only come once lawyers for the city and creditors wrapped up final details of the deal that shaved $7 billion of Detroit's $18 billion in debts and liabilities.

Orr has said it's largely up to the city to decide the effective date of the bankruptcy exit, and it's unlikely Rhodes won't accept the date.

Orr's departure gives full control of city government back to elected leaders, although he had ceded most of those powers back to the mayor and the city council in recent months. While Orr's departure signals the end of a divisive era of state intervention into the governance of Michigan's largest city, Detroit will remain under state oversight for at least a decade.

Under the grand bargain that spared the Detroit Institute of Arts from liquidation and eased cuts to city pensioners, state lawmakers required a largely state-appointed Financial Review Commission to act as a fiscal watchdog over the city, with broad powers to reject contracts, spending, borrowing and labor agreements. Duggan and City Council President Brenda Jones sit on the commission, along with Clinton and other Snyder appointees.

If Detroit meets terms of the bankruptcy and stays within budget for three years in a row, the commission could go dormant.

(c)2014 the Detroit Free Press