This is startling news considering that much of the news out of Detroit has been good lately.
I spoke with several people deeply involved in counselling the governor on Detroit, and none doubted that his next move is an emergency manager. Managing the restructuring of the city’s $12 billion of debt and pension liabilities is too complex to be handled through the political process.
There’s also a rumor that more bad news is coming on the pension shortfall that will make erasing the deficit even more difficult.
Pieces are falling into place quickly. The Financial Advisory Board will get an update Monday on the work of the three consulting firms hired to handle the restructuring.
Teams from Conway MacKenzie of Birmingham are embedded in all city departments and are finding broken systems â€” and savings â€” in every single one. The advisory board and Ernst & Young are digging deep into the budgets of each department in an attempt to match spending to revenue.
The goal is to achieve positive cash flow for the first half of the year. By then, the restructuring blueprint being worked up by New York-based Miller-Buckfire & Co will be ready. It will either be used to take the city into bankruptcy or handed to the emergency manager.
Which one implements the turnaround depends on how cooperative Detroit’s creditors are in shaving the debt. If the manger can convince them to take a significant haircut, the city may avoid bankruptcy.