The architect of Detroit’s bankruptcy filing 10 years ago says it was the best fix for a broken city

Jul 17, 2023, 9:09 PM

FILE - Detroit emergency manager Kevyn Orr speaks during an interview with The Associated Press in ...

FILE - Detroit emergency manager Kevyn Orr speaks during an interview with The Associated Press in Detroit, Thursday, Dec. 12, 2013. The architect of Detroit's bankruptcy filing admits it was a miserable process. But 10 years on, Detroit's former emergency manager, Orr, maintains the restructuring of the Motor City is among his most important accomplishments. On July 18, 2013, Detroit became the largest city in the U.S. to file for bankruptcy. (AP Photo/Paul Sancya, File)

(AP Photo/Paul Sancya, File)

DETROIT (AP) — Detroit’s newly hired emergency manager, Kevyn Orr, stood before reporters in March 2013 and issued a warning to city creditors, unions, vendors and others: “Don’t make me go to bankruptcy court. You won’t enjoy it.”

On July 18, 2013, the restructuring expert did just that, making Detroit the largest city in the U.S. to file for bankruptcy.

What followed was months of negotiations, federal court hearings and an unlikely coming together of foundations to keep city-owned artwork from being sold to help pay off the debt.

“Bankruptcy is a miserable process,” Orr, 65, told The Associated Press earlier this month, ahead of the 10th anniversary of the filing. “It puts everybody outside of their ordinary course, their common spaces.”

Detroit was determined by a state-appointed review team to be in severe financial distress in 2012. Soon after, then-Michigan Gov. Rick Snyder hired Orr — an attorney with the international law firm Jones Day — to take on the heavy lift of fixing a broken city.

Massive population loss that began in the 1950s and a decadeslong downturn in the auto industry and other manufacturers had severely slashed Detroit’s tax base. Many neighborhoods were rife with vacant and burned out houses. Empty lots became dumping grounds for trash, used tires and even boats.

Poverty, unemployment and crime rates were among the highest in the nation.

The city’s budget deficit was north of $300 million. In the months before the bankruptcy, state-backed bond money helped the city meet payroll for its 10,000 employees. In the bankruptcy filing, Orr cited debt of $18 billion or more.

“This is a problem that’s been evolving for 50-plus years,” Snyder, a Republican, said during Orr’s introduction. “This is a problem that now has reached a true crisis point.”

In 2013, underfunded obligations for pensions were about $3.5 billion. It was $5.7 billion for retiree health coverage.

Orr said the city once had 20,000 workers and 10,000 retirees who were owed pensions. By the time of the bankruptcy filing, those numbers were flipped with 20,000 retirees expecting pension payments.

“You can’t see those inverse yield curves and come away with a conclusion that this is going to end up well,” he said.

On top of that, the city had very few assets that could be sold to pay its debt. He listed city-owned paintings and sculptures at the Detroit Institute of Arts, parking lots and Detroit’s water department. He warned then that the artwork could go on the auction block to help satisfy the city’s staggering debt.

“It wasn’t a threat,” he says now. “It was just: ‘Look, I’ve got a crisis. I need the money.’ We were getting overtures, both domestic and overseas, to buy some of the art.”

Deep-pocketed foundations and the state stepped up and raised $800 million in what came to be known as the “Grand Bargain,” softening cuts to city pensions and placing the artwork in a charitable trust.

Without a consensual resolution with creditors, unions and others to solve the debt, “bankruptcy was the only vehicle that could achieve the outcome,” said Orr, who is now partner-in-charge of Jones Day’s office in Washington, D.C.

Detroit exited bankruptcy in December 2014 with about $7 billion in debt restructured or wiped out. The city now boasts balanced budgets, improved services and a blight reduction effort that has led to the demolition of more than 24,000 vacant houses.

Prior to taking on Detroit’s troubles, Orr advised automaker Chrysler (now Stellantis) and National Century Financial Enterprises in their bankruptcies. He considers his experience in Detroit as among his top accomplishments.

“Probably, for me, (it was) the most personally satisfying because it was for people as opposed to corporations or businesses,” Orr said. “It ranks, certainly, among the highest of all the things I’ve fortunately been involved in.”

United States News

Giant panda Xiao Qi Ji eats bamboo in his enclosure at the Smithsonian National Zoo in Washington, ...

Associated Press

Panda Diplomacy: The departure of DC’s beloved pandas may signal a wider Chinese pullback

WASHINGTON (AP) — Wearing a “I Love Pandas” t-shirt and clutching a panda-covered diary, Kelsey Lambert bubbled with excitement as she glimpsed the real thing. She and her mother, Alison, had made a special trip from San Antonio, Texas, just to watch the National Zoo’s furry rock stars casually munching bamboo and rolling around on […]

6 hours ago

FILE - Florida Gov. Ron DeSantis speaks during a Republican presidential primary debate hosted by F...

Associated Press

DeSantis said he would support a 15-week abortion ban, after avoiding a direct answer for months

When Ron DeSantis seemed to say during last week’s Republican presidential debate that he would support a federal ban on abortion at 15 weeks of pregnancy, some anti-abortion activists called it the news they had been waiting months to hear. The president of Susan B. Anthony Pro-Life America, a leading anti-abortion advocacy group, issued a […]

6 hours ago

FILE - This booking photo provided by the Florida Department of Corrections shows Michael Duane Zac...

Associated Press

Florida man who murdered women he met in bars set to die by lethal injection

STARKE, Fla. (AP) — A man is scheduled to die by lethal injection over 25 years after he killed women het met in north Florida bars during a dayslong spate of crimes. Michael Zack III is set to die at 6 p.m. Tuesday for the murder of Ravonne Smith, a bar employee he befriended and […]

6 hours ago

FILE - President Joe Biden's son Hunter Biden leaves after a court appearance, July 26, 2023, in Wi...

Associated Press

Hunter Biden returns to court in Delaware and is expected to plead not guilty to gun charges

WILMINGTON, Del. (AP) — Hunter Biden is due back in a Delaware courtroom Tuesday, where he’s expected to plead not guilty to federal firearms charges that emerged after his earlier deal collapsed. The president’s son is facing charges that he lied about his drug use in October 2018 on a form to buy a gun […]

6 hours ago

Associated Press

US Rep. Henry Cuellar carjacked by three armed attackers about a mile from Capitol

WASHINGTON (AP) — U.S. Rep. Henry Cuellar, D-Texas, was carjacked Monday night by three armed attackers, his office said. Cuellar’s chief of staff Jacob Hochberg released a statement saying: “As Congressman Cuellar was parking his car this evening, 3 armed assailants approached the Congressman and stole his vehicle. Luckily, he was not harmed and is […]

6 hours ago

FILE - Insurrections loyal to President Donald Trump rally at the U.S. Capitol in Washington on Jan...

Associated Press

Prosecutors reveal a reason for Capitol rioter’s secretive sentencing: His government cooperation

Prosecutors want to keep certain details of Samuel Lazar's cooperation under wraps, but they have acknowledged for the first time that he supplied the government with information as part of a plea agreement.

8 hours ago

Sponsored Articles

Home moving relocation in Arizona 2023...

BMS Moving

Tips for making your move in Arizona easier

If you're moving to a new home in Arizona, use this to-do list to alleviate some stress and ensure a smoother transition to your new home.


Ignite Digital

How to unlock the power of digital marketing for Phoenix businesses

All businesses around the Valley hopes to maximize their ROI with current customers and secure a greater market share in the digital sphere.



Here are the biggest tips to keep your AC bill low this summer

PHOENIX — In Arizona during the summer, having a working air conditioning unit is not just a pleasure, but a necessity. No one wants to walk from their sweltering car just to continue to be hot in their home. As the triple digits hit around the Valley and are here to stay, your AC bill […]

The architect of Detroit’s bankruptcy filing 10 years ago says it was the best fix for a broken city