“Over many years, the city made many promises to employees and workers and incurred debt based upon a city that was much larger,” he said, noting the emergency manager will first need to address “short-term liquidity issues” while handling “long-term legacy liabilities.”
Horner also pointed out the manager would need to have experience with bankruptcies.
“If the emergency manager is not able to restructure, we will end up with Chapter 9,” he said.
But bankruptcy can be avoided if everyone comes to the negotiating table, said William M. Dolan, a partner in the Brown Rudnick international law firm.
Providence, R.I., had a $110 million structural deficit, $1 billion in unfunded health care and an $800 million unfunded pension. Dolan represented the city last year in negotiations with its active unions and retirees over concessions to address legacy liabilities.
Both sides negotiated everything down and converted health care coverage to Medicare from private plans.
“When you go into bankruptcy your pension is gone. It’s gone,” Dolan said.
But for residents, the appointment of an emergency manager runs deeper than ledger sheets and balance books.
“You are telling the people of Detroit that they are too stupid to manage their own affairs, and that’s an insult,” said Oliver Cole, a photography studio owner in the city and president of a 900-family neighborhood association on the northwest side.
“We want the city of Detroit to function,” the 62-year-old added. “We want it to be a great city, have police, fire, good EMS, trash pickup and parks maintained.
“The emergency manager gives people the opinion he can do anything. That is tantamount to another mayor and that’s why I disagree. You have supplanted the will of the people to elect their leader. Now you say ‘your voice doesn’t count.’ “