Michigan governor Rick Snyder has announced a state takeover of Detroit’s finances and appointed as manager a corporate bankruptcy expert who takes a “can-do” attitude toward turning around the destitute city, calling his task the “Olympics of restructuring.”
Kevyn Orr, a lawyer who worked on the restructuring of Michigan-based carmaker Chrysler, said he hoped to avoid a bankruptcy filing by Detroit, something that would rank as the biggest municipal failure in US history.
“Let’s get at it and work together because we can resolve this, people of good faith. Don’t make me go to bankruptcy court,” Mr Orr told a news conference, where he was introduced by Mr Snyder and flanked by Detroit mayor Dave Bing.
Mr Snyder’s move amounts to the biggest state takeover of an American city in more than two decades. Mr Orr, who was officially approved by a committee of state officials on Thursday, is expected to assume financial management of Detroit on 25 March.
As the emergency manager, he will supplant the authority of Detroit’s elected officials. Mr Orr will have broad powers, including the ability to renegotiate labour contracts, privatise services and sell certain city assets.
Detroit has been in a long economic decline. The city is the birthplace of Motown music and was once the thriving centre of the US auto industry. In the 1950s, it was the fifth-largest American city at 1.8 million people, but now ranks 18th with 700,000.
Mr Snyder praised Mr Orr, 54, as the right person for the job.
“He’s had a very successful career in restructuring and bankruptcy. He’s one of the leading experts in the country,” Mr Snyder said.
In addition to his work with Chrysler – for which Mr Orr billed $1 million in fees during the first year of the restructuring of the smallest of the three major US car firms – Mr Orr has other Michigan ties. He received both undergraduate and law degrees from the University of Michigan.
He is African-American, which some politicians have said could help him deal with community leaders in a city that is 83 per cent black.
Detroit has run operating deficits for nearly a decade, is starved of cash and facing a crushing burden of debt from commitments such as pensions and health insurance.
More than a third of Detroit residents are officially classified as living in poverty, and it has an unemployment rate of 18.2 per cent, far above the US jobless rate of 7.7 per cent, according to government figures.
Services such as street lights and policing have broken down, and the city has suffered from mismanagement and political corruption.
This week, former mayor Kwame Kilpatrick was convicted of two dozen federal charges of corruption and bribery linked to kickbacks on city contracts.