Mayor: Effective service delivery to residents among Detroit's challenges after bankruptcy

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Kevyn Orr has agreed to step down as Detroit's emergency manager, saying that the city will no longer be in a financial emergency once it exits bankruptcy. (Dec. 10)

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DETROIT — The formalities may be over for Detroit, which officially exits bankruptcy after midnight Wednesday and shrugs off the yoke of state receivership. But efforts to make the Motor City livable for residents and appealing to businesses will likely have to last for years to come.

"The reality is tomorrow's not any different than today," Mayor Mike Duggan said Wednesday during the announcement that Detroit was coming out of the largest municipal bankruptcy in U.S. history. "We still have enormous challenges delivering the services in the city every day, but at least now we are no longer a city that's in bankruptcy."

Reducing Detroit's crime rate, removing blight, demolishing tens of thousands of abandoned houses and finding ways to increase revenue — partly by building up the tax base — are among the issues the city faces as it moves forward. Detroit also must work with a financial review commission on its budgets and spending.

"We're going to start afresh ... and we're going to do the best we can to deliver the kinds of services the people in this city deserve," said Duggan.

State-appointed emergency manager Kevyn Orr, who filed Detroit's bankruptcy petition in July 2013 and put together its restructuring plan, also officially stepped down Wednesday as financial overseer.

On the eve of the city's emergence from bankruptcy, it completed the sale Wednesday of $1.28 billion in bonds. The money, to be repaid from tax receipts, pays off various creditors, refinances municipal debt and funds improved public services, said Miller Canfield, a law firm handling the deals.

Orr had extraordinary authority over Detroit government for 18 months before giving most of it back to Duggan in September. Michigan Gov. Rick Snyder hired Orr in March 2013 to take over Detroit's finances. Orr filed the city's bankruptcy petition as an effort to overcome decades of population loss, a chronic loss of tax revenue and piles of debt that couldn't be managed.

Last month, federal Judge Steven Rhodes approved Detroit's plan to restructure its $12 billion debt load. It essentially removes and restructures $7 billion of that debt, while calling for $1.7 billion in savings and revenue over a decade to improve city services.

"What the plan of adjustment says over 10 years is if the city hits all of its budget targets and we successfully raise revenue in multiple areas and we successfully cut costs in multiple areas ... there would be $1.7 billion in new services," Duggan said. "Basically, it's money that we're going to have to earn as we produce."

About $440 million of that will be used to eradicate blight and help demolish the more than 40,000 houses standing vacant in Detroit neighborhoods. Some $430 million is promised to improve police and fire services, and response times to 911 calls. Detroit has been criticized for having some of the slowest police response times in the country.

Some retirees also will see their pensions cut by 4.5 percent. Cost of living allowances were reduced for retired police and firefighters.

The impact on retirees would have been more onerous if not for an $800 million promise from foundations, major corporations and the state to help soften cuts to their pensions while protecting city-owned pieces in the Detroit Institute of Arts from possible sale.

The plan was reworked a number of times over the past year as the city reached deals with each group of creditors.

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Associated Press writers Ed White and David N. Goodman contributed to this report.

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