When Kevyn Orr was announced as Detroit's emergency manager, he said he took the job because of the challenge - the "Olympics of restructuring" he called it.
Today, Orr unveiled his plan for that restructuring at a two hour meeting with people representing banks, insurers, pension funds, unions, and other companies holding Detroit's debt.
You can read his 128 page "Proposal for Creditors" here.
Orr said the city is defaulting on about $2.5 billion of debt.
The AP reports he asked creditors to take about 10 cents on the dollar of what they're owed - underfunded pension claims would get less under Orr's plan.
He instituted a moratorium on all of Detroit's payments on unsecured debt, and plans to set aside $1.25 billion over 10 years for public safety, lighting and neighborhood blight elimination.
Orr's final conclusion:
All of the City’s stakeholders can benefit from a restructured and revitalized Detroit.
We've heard all about the serious financial troubles faced by the city - now we have some more details with this proposal.
Here are a few things highlighted from the proposal:
The city is insolvent
That's something Orr wants to make clear to creditors. It can't pay the bills. From the proposal:
Absent ongoing cash intervention (primarily in the form of payment deferrals and cost cutting), the City would have run out of cash before the end of FY 2013.
Detroiters have the biggest tax burden in the state
The highest income taxes, property taxes, and the only "utility user's tax" in the state. From the proposal:
Per capita tax burden on City residents is the highest in Michigan. This tax burden is particularly severe because it is imposed on a population that has relatively low levels of per capita income.
Orr says businesses and people are leaving the city as a result. He calls for restructuring taxes in the city.
Operations must be overhauled
Orr's proposal says that for the city to be healthy again - and have the ability to pay its bills in the future - things like its crumbling infrastructure, blight, crime and lighting have to be addressed.
That's why he's proposing to stop debt payments and reinvest $1.25 billion in the city.
Matt Helms with the Detroit Free Press wrote about the proposal calling it "an extraordinary, complex and painful path back to solvency for the city of Detroit."
The impact of the document Orr released publicly and to creditors in a historic meeting this morning cannot be understated.
Orr and his team discussed a staggering amount of liabilities — as much as $20 billion — today as they met with as many as 150 creditors called together in a bid to win an out-of-court settlement of the city’s financial disaster or, at least, a municipal bankruptcy proceeding in which most creditors agree to deals before a Chapter 9 petition is filed.