Michigan governor picks Detroit emergency manager

Joe Guillen and Matt Helms, Detroit Free Press | USATODAY

Show Caption Hide Caption Michigan declares financial emergency for Detroit The governor of Michigan announced Detroit is in a state of financial emergency and nominated Kevyn Orr to be the emergency manager.

Detroit is largest U.S. city to be taken over by its state

An emergency manager is able to overrule elected officials

Michigan%27s largest city has %2414 million in long-term debt%2C %24327 million in accumulated deficits

DETROIT — Michigan's governor introduced Detroit to Kevyn Orr, the man he will put in charge of fixing the city's financial mess and trying to avoid a bankruptcy.

Detroit became the largest city in U.S. history Thursday to be taken over by its home state with the appointment of Orr, 54, a high-powered Washington lawyer who worked on Chrysler's 2009 bankruptcy restructuring. He will oversee efforts to stabilize a city flailing under more than $14 billion in long-term liabilities, an accumulated deficit of $327 million, a plummeting tax based and unprecedented population loss.

"I make this decision after careful and thoughtful deliberation," said Gov. Rick Snyder, flanked by Orr and Detroit Mayor Dave Bing, whom Snyder thanked for partnering with him and agreeing to work with Orr.

The state's emergency loan board approved Orr 3-0 later Thursday on what Snyder called Orr's ability to work with people cooperatively, great technical skills and a record of tough decision making. Under state law, the Local Emergency Financial Assistance Loan Board officially hires the emergency manager and sets a salary. Orr will make $275,000 a year.

"I don't view this as an act of isolation. This is not about asking one individual to come in and turn around the city of Detroit," Snyder said. "This is a problem that has now reached a true crisis point. ... This is an opportunity for us to work together, to bring people together as Detroit, Michigan."

In the early 20th century, Detroit was the country's fourth most populous city behind New York, Chicago and Philadelphia. It had nearly 2 million residents in 1950 and now has shrunk to 700,000 and 18th in rank. A declining tax base; nearly 2 in 5 residents living in poverty; and a former, now convicted, mayor who spent lavishly have taken their tolls on the city's finances.

The mood was somber at city hall.

The City Council decided earlier Thursday to not challenge Snyder's appointment in court after vowing to fight. The council first met in public with Councilwoman JoAnn Watson making a motion to hire lawyers to pursue a legal challenge. Then the council went into closed session. When it emerged, Watson withdrew her motion.

Council President Charles Pugh said other legal challenges that don't come from City Council are possible.

In a decision that has prompted protests and anger, a state review team last month declared Detroit in a financial emergency from which it cannot recover without state intervention.

It also concluded that the city's problems were not just financial but also structural. It cited the city's inability to collect on debts and conflicting assessments of staffing levels within the police department.

Detroit is the sixth city in Michigan that will be operating with a state-appointed local government official who will have almost unilateral authority to set the budget, hire and fire employees, create ordinances and sell property. The others are Allen Park, Benton Harbor, Ecorse, Flint and Pontiac. An emergency financial manager had governed Hamtramck from November 2000 until February, and the state has emergency managers in place in some school systems including Detroit.

Orr, a partner in the Jones Day law firm in Washington, has extensive experience in municipal finances, public infrastructure projects, public pension matters and litigation. Jones Day has an international reputation for its work with large restructuring efforts. The firm has 2,500 lawyers worldwide.

Orr has bachelor's and law degrees from the University of Michigan and has worked as a business restructuring specialist.

Snyder's announcement caps nearly a year of arguments and legal battles that pitted the city against the state and unions against elected officials as Detroit operated under a consent agreement to try to tackle its financial woes.

"In the minds of Detroiters, they feel like an emergency manager is going to come in and fix their quality of life," said state Rep. Harvey Santana, a Democrat from Detroit. "And nothing could be further from the truth. An emergency manager's job is to fix the spreadsheets. And that doesn't deal with crime or emergency response times, abandoned homes and blight, or that my trash is getting picked up at 11:30 at night."

Detroit mayor discusses working with emergency manager Detroit Mayor Dave Bing says he doesn't care who wins praise for fixing the city as long its public services — and its bottom line — improve.

VIDEO: Detroit's mayor discusses working with an emergency manager.