In some ways, the bankruptcy is like a jigsaw puzzle, where a thousand little pieces have to fall into place before the big picture can take shape. ~ Stephen Henderson, The Detroit Free Press
One More Lap. U.S. Treasury Secretary Jacob Lew will travel to the Motor City Thursday and Friday this week. While he will not be bringing cash or a new urban policy, he will travel with some hope of wrapping up discussions with regard to redirecting federal foreclosure relief funds to be invested in blight removal—a critical step towards the long-term sustainability of Detroit. According to the Treasury, the Secretary is making the trip to “highlight the Obama Administration’s continued commitment to the city’s revitalization and explore ways to promote job creation and economic growth.” Secretary Lew oversaw the Treasury’s efforts to shed its final shares in Detroit-based automobile lender Ally Financial Inc. Thursday, he will meet with the city’s non-profit leaders to discuss ways the nonprofit sector could help spur Detroit’s revitalization “by developing and investing in programs that support economic development, promote education and workforce skills training, and increase access to capital.” Friday, the Secretary will tour New Center Stamping, a metal stamping business in Detroit which received $3.7 million in funding from the Treasury Department’s State Small Business Credit Initiative, and was credited with saving existing jobs and “will allow it to expand its workforce,” according to the Treasury. In addition, Secretary Lew will meet with area business and community leaders to “discuss the condition of Detroit’s economy.”
The Secretary will be walking a fine line, as the Obama Administration has been emphatic that – unlike the federal bailouts for General Motors and Ford, the Obama administration will not provide a bailout for the City of Detroit. Nevertheless, as Emergency Manager Kevyn Orr and the ever so synchronizing U.S. Bankruptcy Judge Steven Rhodes are coordinating the “thousand little jigsaw pieces” to fall together, negotiations to free up federal blight funding could add some greater flexibility and resources to better enable all those pieces to come together. Mayhap more importantly, as we think about longer term recovery and fiscal and economic sustainability, the discussions this week could be vital to Mr. Orr’s proposed plans to dedicate about $520 million to blight removal during the next five years to address the Motor City’s estimated 78,000 blighted and abandoned properties. Already, the Obama administration has a team of advisers — including two from Treasury — working to find ways to speed up funds and help the city apply for funds for which it might be eligible. The team also is providing technical assistance and other help.
Judge Rhodes Looks to the Future. U.S. Bankruptcy Judge Steven Rhodes is expected – as early as today – to announce the selection of a municipal finance expert to not just him analyze the feasibility of Detroit’s plan of adjustment, but, more importantly, to help ascertain if that plan will provide for a sustainable economic foundation for the future. He would like to select a candidate to independently review the long-term feasibility of Detroit’s plan of not just how to successfully exit the largest municipal bankruptcy in the nation’s history, but, perhaps more importantly, how to rebuild a city that is barely a third of its former self. Judge Rhodes is in a hurry, because he made clear last Friday that he expects a report on the plan by the end of May or mid-June—especially with the likelihood he will commence the trial on the final plan of adjustment in late July or early August. The finalists are:
- former New York Lt. Gov. Richard Ravitch, who helped oversee the resolution of New York City’s near-bankruptcy in the late 1970s;
- Chicago-based restructuring consultant William Brandt, head of Development Specialists and chairman of the Illinois Finance Authority;
- Martha Kopacz of Phoenix Management Services;
- Dean Kaplan of Public Financial Management Inc.; and
- Wayne State University law professor Peter Hammer.