Was Michigan Treasurer Andy Dillon Soused When He Signed Off On The State Takeover Of Detroit ? Just when convinced Detroit couldn't surprise , you see something like this ! Oh the irony - Andy Dillon receives " Sobering Report " from the Emergency Manager that Detroit is insolvent .....

http://www.detroitnews.com/article/20130512/METRO01/305130320/Detroit-insolvent-EM-Kevyn-Orr-says?odyssey=mod|breaking|text|FRONTPAGE

( Bankruptcy looming ? )

Detroit insolvent, EM Kevyn Orr says

City's cash flow running in the red, ability to borrow exhausted

• By Chad Livengood
• 327 Comments

Zoom

Detroit Emergency Manager Kevyn Orr (Detroit News file photo)

Emergency Manager Kevyn Orr says the city of Detroit's cash-flow crisis makes it "insolvent" and unable to borrow more money to mask over debts being made worse by skipping millions in payments for retiree pensions and health care.

After 45 days on the job, Orr's initial assessment of Detroit's perilous finances is laid bare in a 41-page report to be delivered today to state Treasurer Andy Dillon.

Calling it "a sobering wake-up call about the dire financial straits the city of Detroit faces," Orr said he will use the report as a baseline for paring down the city's $15.6 billion in debt and long-term liabilities.

Orr, a Washington, D.C., bankruptcy attorney, did not use the word "bankruptcy" anywhere in his report but said the city is "insolvent" and has "effectively exhausted its ability to borrow" after years of issuing long-term debt to pay its bills. Previously, he has said he hopes to avoid a Chapter 9 filing.

The report hints that city employees who were not hit by last year's wage reductions could face pay cuts in the near future and that Wall Street bondholders will be asked to take a haircut to relieve a city that shelled out $133 million in debt payments last year on a $1.23 billion budget.

Orr also says he will evaluate "options to reduce or eliminate certain health care costs for both active and retired employees" in light of a $5.7 billion unfunded health care benefit for 18,500 retired city workers and 10,000 active employees.

"No one should underestimate the severity of the financial crisis," he said Sunday in a statement.

Under the new emergency manager law, Orr had to give Dillon a report on his initial findings, much of which mirrors what a state panel determined in finding a financial emergency in Michigan's largest city and appointing Orr to take over City Hall.

Mayor Dave Bing, who along with Gov. Rick Snyder received an advance copy of the report, said in a statement Sunday that his office hadn't yet conducted a "comprehensive review" of the report, but Orr's initial findings were consistent with his administration's assessment of the city's finances.

"The plan recognizes the breadth and depth of the financial crisis and offers key, initial guideposts for how best to continue moving forward and ensuring residents are receiving the critical services they need and expect," Snyder spokeswoman Sara Wurfel said in a statement. "The governor and state are there in continued partnership."

Despite budget cuts adopted by the City Council and Bing before his appointment, Orr said the city's $326 million deficit is expected to grow by $60 million before the fiscal year ends June 30. When another $70 million in borrowing is accounted for, the city's deficit is at least $456 million, Orr spokesman Bill Nowling said.

"In other words, Detroit spends more than it takes in — it is clearly insolvent on a cash flow basis," Orr wrote in the report.

The emergency manager's spokesman put the city's predicament in more blunt terms. "We're going to be out of money by the end of the year," Nowling said Sunday. "If all we did was collect taxes and pay our debt, we couldn't pay it off in 20 years. That's the situation that we're in now."

As part of the deficit, Orr counts $226 million in accounting gimmicks and delayed payments owed to vendors and the city's pension funds. Detroit is paying just $31 million of a required $139 million payment toward its pensions this fiscal year, Orr said.

For the first time, Orr raised questions in the report about how well-funded Detroit's two city employee pensions systems really are.

The Detroit General Retirement System and Police & Fire Retirement System claim to have been 83 and 100 percent funded, respectively, as of June 2011. But Orr and a team of consultants aiding the restructuring of city government are beginning to question mathematical assumptions used to determine the value of the funds.

The city's June 2011 report showed the pensions having a $646 million accrued unfunded liability. But Orr said the market value of the two pension funds' assets — such as real estate — were more than $1 billion less than the actuarial assumptions.

Orr has asked for 56,000 pages in documents from both pension boards as he tries to figure out their true worth, Nowling said.

"Utilizing more current data and or conservative assumptions could cause that deficiency to rise into the billions of dollars," Orr wrote.

If the pensions are worth less than previously thought, Detroit would have to add millions more into the funds above the $108 million in pension payments the city is already behind on, said Eric Scorsone, a Michigan State University economist and emergency manager law expert.

"The pension was kind of seen as one bright spot and if it's not, I think, as they would say, it's another nail in the coffin," he said.

"That was one of those bright spots that well, at least the pension was funded," Scorsone said. "Obviously they can't pay the $100 million, let alone $200 million."

Retirees outnumber active employees paying into the plans, and the police and fire plan is closed to new employees under the most recent contract, said George Orzech, a fire department battalion chief.

"That's going to be even more of a drain," said Orzech, a police and fire pension board member.

Orr's report warns that past borrowing to make pension payments, and Wall Street bets against those bonds, could haunt the city's bottom line for years.

Debt service on $1.8 billion in Pension Obligation Certificates and related swaps the city owes is expected to escalate over the next decade, with the principal alone more than doubling from $23.1 million this year to $56 million in 2023, according to Orr's report.

Interest on the pension-related debt will be $83.8 million of the city's $139.9 million in debt interest this year.

"You've got serious money problems coming down the road here because of the POC payments you took out," Orzech said.

Orr's initial findings of trouble in the pension fund and the hugely unfunded retiree health care "could be the tipping point where the city ends up having to file bankruptcy if there's no concessions made," said Douglas Bernstein, managing partner of the bankruptcy and creditors' rights practice of Plunkett Cooney in Bloomfield Hills.

Orr could argue in federal bankruptcy court that public employee pensioners in Michigan are constitutionally guaranteed to get paid before other debtors.

"If he takes that position, the problem with taking it is he can't afford to pay it," Bernstein said. "It's simply an obligation that's unsustainable."

Retiree health care benefits aren't constitutionally protected and could be wiped out by the emergency manager, Bernstein said.

Ed McNeil, a representative for the city's largest union, AFSCME Council 25, said the rising legacy costs are nothing new and as the city continues to privatize and reduce its workforce, it is losing funds that could have been paid back into the system.

"If you stop hiring people to pay into the system, then your money is gone," said McNeil, whose union represents about 2,000 city workers. "This is a 'set up to fail' situation."

"It's nonsense. All of this stuff is common sense. People act like it's rocket science. It makes me so mad that the employees are the scapegoat for something that the city created."

Orr was home Sunday in Chevy Chase, Md., with his family and not available for an interview, Nowling said.

He will use the report over the next 60 to 90 days to begin negotiating with creditors and labor unions as part of a restructuring package, Nowling said.

and......

Was Michigan Treasurer Andy Dillon Soused When He Signed Off On The State Takeover Of Detroit?

By Steve Dibert05.9.13 

Detroit’s Emergency Financial Manager’s Employment Contract May Be Invalid If Dillon Was Drunk When He Signed It

Bar patron in Redford Township trying to out drink State Treasurer Andy Dillon

Steve Neavling at the Motor City Muckraker reported yesterday that Michigan Treasurer and former Speaker of the Michigan House, Andy Dillon had checked into a treatment center on the outskirts of the Detroit suburbs to seek treatment for his problem with alcohol that was beginning to not only endanger his life but affect his job performance.

Dillon who was appointed by GOP Governor Rick Snyder to head the Michigan Department of Treasury in 2011, has been sleeping in hotel rooms and on sofas at the homes of his friends since his divorce last year.

Although the abuse Dillon does to his liver may have been a surprise to the self-absorbed political types in Lansing, anyone familiar with the politics of Metro-Detroit especially in Wayne County has been acutely aware of Dillon’s reputation of trying to impress shot girls and waitresses with his drinking prowess by slamming shots of Grey Goose at Sandy’s on the Beach and at Cinco De Mayo’s in his old Michigan House district of Redford Township for years.

Dillon’s problem with alcohol and the discovery of Detroit Emergency Financial Manager Kevyn Orr’s unpaid taxes after being hired shows a pattern of sloppiness and an inattention to details by Governor Rick Snyder’s office.

Unlike Orr’s tax issue, which was cleared up within days after Chad Livengood at the Detroit News approached a visibly embarrassed Rick Snyder and Orr back in March, Dillon’s substance abuse problem is not something that can be cured with a week of lectures or counseling at a Brighton hospital or a two week visit to the Betty Ford Clinic.  Rumor has it, that this is was not his first visit to a rehab clinic and there is a very strong possibility it won’t be his last.   Dillon’s issues don’t just affect him and his family or friends, with the GOP dominated Michigan Legislature increasing the power of his office with the newly enacted Emergency Financial Manager laws, his actions while sober or intoxicated affect millions of people.

If it can be proven that Dillon was intoxicated at the time he signed any agreements or contracts on behalf of the state with any individuals or entities, a serious argument could be made that those contracts are not only voidable but even possibly void because he was not mentally competent to sign and understand what he was signing.

Mayor Bing’s chance to spread good news goes up in flames – literally

In a city as broke as Detroit, it’s not often that Mayor Dave Bing has good news to report.

But Wednesday afternoon, his office was poised to show the media that the city was demolishing an abandoned two-story apartment building on the west side that had collapsed and become a hazard.

As if on cue, a fire erupted at a junkyard a few blocks away on Joy and Alpine about 15 minutes before the press conference was to begin.

Reporters fled to cover the blaze, which spewed out black smoke that was visible from downtown for nearly two hours. As a lone TV cameraman waited for the press conference to begin, the demolition trucks were stuck in traffic, which came to a halt because of the fire.

The demolition was never covered.

With more than 80,000 vacant houses and buildings across the city, abandonment is among Detroit’s most serious problems. But making headway is difficult as the city continues to cut services to bridge a mounting budget deficit.