Local 4's Rod Meloni is inside federal court for day 4 of Detroit's bankruptcy trial.
9:30 AM --
Vastly different morning here at the federal courthouse than the past several. While we await the testimony of Detroit Emergency Manager Kevyn Orr and Governor Rick Snyder today, there were no protestors present, the observer crowd that has been in the overflow room virtually nonexistent and yet the security is markedly higher. Extra U.S. Marshalls are pacing the sidewalk around the building. There are more police vehicles present and there was one I haven’t seen in a while. Detroit Police brought in their portable security tower. It is a retractable guardhouse with tinted windows that extends at least three of not four stories into the air. It is obviously designed to deal with crowd control. The last time that piece of equipment was here was for the underwear bomber’s trial and sentencing. Clearly executive protection is considered vitally important today. The courtroom is full of attorneys and we await the judge’s arrival. You
9:40 AM --
Judge Rhodes took the bench @ 9am sharp. Kevyn Orr was already on the stand. Greg Shoemaker of Jones Day started the direct examination. He asked Orr to talk about the city’s services and how they are provided. He started with an anecdote that said one day the EMS ambulances were all busy and he and the union president had a meeting that day at City Hall. A woman ended up having a seizure in the building and the president had to tend to her because no one else could.
Orr spoke of substandard equipment, lots of calls, they range from people who call 911 saying they fell asleep and their arm had fallen asleep too… to shootings and stabbings.
On the subject of street lights he said 40% of the city’s lights are out, large swaths for the city do not have lights. Deferred maintenance has caused the system to become obsolete. Most of the equipment is 1970’s vintage, the grid is overworked and antiquated. It is so bad that private contractors the city has attempted to bring in to fix the problems will not allow their employees to work on the grid as it is unsafe. He said “No other large municipality that is of comparable size has these kinds of problems.”
On the subject of blight Orr said it is prevalent, causes lots of problems, is in insurance terms an “attractive nuisance” leading to crime like rape. He said a Skillman foundation study showed 50% of Detroit school children are afraid of everything and to cope they pick up "a stick or a rod to protect themselves. To give you an idea of how combative this day might become, an objector union attorney objected to Orr’s testimony as hearsay. Judge Stephen Rhodes overruled the object and allowed testimony to continue.
Orr said “City workers work very hard for the most part” and he went on to further talk about the lighting department’s troubles. He said in one neighborhood there were five homes getting power and the rest were businesses. He said the city ended up subsidizes power for institutional services. Of the lighting grid itself he revealed “it is a patchwork of repairs. The grid went out last summer when a test was conducted and tripped the grid and turned off lights for two and a half days.” He said $12 million has been put into a fund to fix the lights and another $1.8 million were found to run it. He said he is trying to get a lighting plan.
Shoemaker asked Orr is anyone had ever said city services were adequate. Orr’s answer was “no one has ever said services are adequate.”
Orr revealed the City has declared a Blight emergency which abolished the requirement of “class b” licenses to demolish a home 35’ or less and he is trying to go after residential blight. The program apparently has worked well enough that he is now attempting to go after “class a” or buildings larger than 35’ high.
Shoemaker asked him if the financial emergency is still in effect. He said it is.
On the city’s financial condition, when Orr took office he said the cash situation was dire. The city was a billion dollar budget, the city in the middle of June the city was going to have on hand $7 million. The revenue situation was trying. The city had seen a period of decline. The revenue collections were still challenging and it was trying to make up for cash flows. The City’s liabilities were significant. I had read that the statements of liability being with with legacy costs at $12 billion, that grew to $14 billion. During my tenure and the work done after I got there it was $4 billion higher. His reaction: “I knew things were bad, it was shocking , just how dire things were.” I was informed that our cash flow was so tight that we were close to being unable to make payroll. Often the city was paying its bills on a schedule that went as long as 108 days or later. The city was “bumping along” in a set of very bad situations.
9:50 AM --
Kevyn Orr continues to testify. Attorney Jones Day Jeff Shoemaker of Jones Day continues asking Orr to lay out the city’s financial problems. Orr said as soon as he took over in March 2013 said the city’s cash position was $900,000 at year’s end saying it was below the margin of error on a billion dollar budget. That meant the city had a negative cash flow.
Later Orr said as of April 26, 2013 the city had actual cash of $64 million and $226 million in obligations. At that time he said the city was deferring payments and it intended to continue to defer obligations to avoid running out of cash. It was at this point Orr said he felt the city was “clearly insolvent on a cash flow basis”, which is one of the requirements the city is obligated to show as part of its bankruptcy filing. Once again Orr said “No one on a serious basis ever said the city was not insolvent.”
He was asked about an appearance on WWJ-AM radio where he said “the public can comment… this isn’t a plebiscite” .he offered one plan a financial and operating plan that was the plan he was required by law to create. He called it a true summary and a true status of the city’s situation.
Of a presentation he did at Wayne State University in early June he said the city was not paying $100 million pension payments along with deferrals to reimbursable accounts. He showed a slide from the presentation that said “Detroit spends more than it takes in. It is insolvent. This path is not sustainable.”
Kevyn Orr was then asked to discuss his proposal for creditors given on June 14th 2013 at Metro Airport.
Shoemaker: "Did you tell anyone that the plan was non-negotiable?"
10:07 AM --
Why do you believe this reinvestment is necessary: "This is not the way any city in America should look or operate"
Blight is unacceptable. Our response times are poor. Orr once again reiterated: "I've heard no one say this is a way a city should operate."