Detroit Mayor Mike Duggan Says Bankruptcy Exit Plan ‘Not Without Risk’

Detroit Mayor Mike Duggan testified Monday, Oct. 6, 2014, in Detroit's bankruptcy trial. He said he and city leaders are committed to following the plan for the city to emerge from bankruptcy. (Photo: Jessica J. Trevino, Detroit Free Press)
Detroit Mayor Mike Duggan testified Monday, Oct. 6, 2014, in Detroit’s bankruptcy trial. He said he and city leaders are committed to following the plan for the city to emerge from bankruptcy.
(Photo: Jessica J. Trevino, Detroit Free Press)

Detroit Mayor Mike Duggan testified Monday that he and other Detroit leaders are committed to following the plan for the city to emerge from bankruptcy, but the challenges ahead that most worry him are things beyond his control.

Chief among them would be another national recession, drops in state revenue sharing to local governments and potential new casinos in Michigan that could draw gamblers away from Detroit’s three gaming halls and reduce the city’s wagering tax revenues.

“I support this plan, and I believe it is feasible,” Duggan said under questioning from Jones Day lawyer Tom Cullen on Monday in hearings on the city’s bankruptcy exit strategy. “I can’t predict a national recession. I can’t predict a cut in state revenue sharing. I can’t predict other casinos being approved. Those are the risks I signed up for as the mayor. I believe within this plan are the resources we need to be successful.”

Duggan took the stand on Day 19 of the hearings on whether U.S. Bankruptcy Judge Steven Rhodes will approve the city’s plan of adjustment, its blueprint for exiting the largest municipal bankruptcy in U.S. history, shedding $7 billion in debt and reinvesting $1.4 billion to restore public services.

Duggan also noted that a large chunk of the reinvestment money in the plan only materializes if Detroit becomes a more efficient city government that better collects tax and fee revenues owed to it. Duggan said he reviewed the restructuring and reinvestment numbers with every department head in the city and came to the conclusion that the plan is feasible.

“This is going to be tight, and it’s not without risk,” the mayor said.

Cullen questioned Duggan extensively about progress made so far, including reaching a deal with the suburbs for a new regional water authority that will raise $50 million a year for 40 years for upgrades to the aging infrastructure.

Duggan also touted the Detroit Land Bank’s efforts to get abandoned and neglected homes fixed up or auctioned off to new owners and significant progress in replacing streetlights throughout the city. The city’s Public Lighting Authority has already installed 20,000 new lights, restoring service to about half the city’s neighborhoods, Duggan said.

But Duggan was careful not to overplay successes given the scope of what it will take to make Detroit a more livable city with sufficient public services to stop the city’s decades-long population decline. And, he said, he’s not made enough progress yet with departments including the Detroit Department of Transportation, which doesn’t have enough reliable buses in its aging fleet to meet its posted schedule.

“We’re probably at about 10% of where we need to be,” Duggan said. “We’re building in the right direction. It’s going to be a multi-year process” before Detroiters get the level of services expected of a big city.

Ed Soto, a lawyer for the city’s last major holdout creditor, Financial Guaranty Insurance Co., a bond insurer with a $1.1-billion claim against the city, asked Duggan about statements he made while running for mayor last year in which Duggan said he would not work with emergency manager Kevyn Orr and would try to force him out.

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SOURCE: Detroit Free Press – Matt Helms and Joe Guillen

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