What Detroit emergency financial manager has authority to do

Detroit EFM Kevyn Orr can suspend elected official wages, benefits first

By Rod Meloni - Reporter, CFP ®

DETROIT - The first thing newly-appointed Detroit Emergency Financial Manager Kevyn Orr is allowed to do when he officially takes office is suspend wages and benefits for all elected officials and the city's chief administration officer. Orr can restore the wages and benefits later if he so desires.

Orr will wade into the city's books, analyze them for fiscal stress and take whatever corrective actions he feels necessary. Among them: amend, approve or disapprove of budgets, pay obligations, contracts, expenditures and loans.

Read more: Kevyn Orr officially named Detroit EFM

He will establish staffing levels, consolidate or eliminate departments and perhaps most controversially he will be able to sell city assets. If he needs more tax revenue he can order millage elections to raise it.

Orr can act as sole agent in collective bargaining with unions. He can initiate legal action to enforce compliance of his program.

Here is what Orr cannot do as EFM:

He cannot raise taxes or sell assets unilaterally. The emergency financial manager needs stat treasury approval to do that.

He also cannot violate Detroit's city charter, a document the state review team said was an impediment to the city's rebound.

Detroit City Council still has legal role

Detroit City Council may not be paid but it does have a legal role. City Council can challenge certain EFM actions. However, in order to do so City Council must propose equal alternatives pretty much dollar-for-dollar. The emergency loan board decides the issues.

Orr says he wants to work with City Council, Mayor Dave Bing and bondholders for one good reason.

"The one thing everybody needs to know if you go into bankruptcy, Chapter 9 of the bankruptcy code is weighted toward municipality. I don't want to pull that cudgel out unless I have to. I prefer to pursue a consensual resolution," Orr said.

Gov. Rick Snyder announced Kevyn Orr as his top candidate for the emergency financial manager position in Detroit on March 14, 2013. A state board approved the recommendation soon after.

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