One of the tens of thousands of abandoned houses in Detroit. (CC:Notorious4life)
DETROIT, April 22 (UPI) -- A U.S. bankruptcy judge has tapped Martha Kopacz of Phoenix Management Services of Boston and former New York Lt. Gov. Richard Ravitch as consultants for Detroit's bankruptcy plan.
Ravitch helped New York get through its fiscal crisis in the 1970s and was assigned by the court to help evaluate that city’s debt-cutting plan. Kopacz, as a paid expert witness, will be asked to decide if the city's bankruptcy plan is feasible and whether the assumptions that underlie its forecasts are reasonable, according to the court filing.
Kopacz said her firm’s estimated fees are $800,000 to $1.2 million for 4 or 5 people working up to 60 hours a week and factoring in a 10% discount. They will be expected to submit a report June 24 and Kopacz will be available to depose other parties involved in the city's bankruptcy case.
Judge Steven Rhodes took up Ravitch's offer to help the city for free, but did not agree to employ his non-profit Ravitch Group, which he formed with three colleagues.
Ravitch said he will look at the finances of the city and will determine how they were derived, ensuring that the Detroit's finances are sustainable post-bankruptcy.
“You don't solve an economic problem by borrowing money,” Ravitch said. “That's lesson 1, lesson 2 and lesson 3.”
Detroit has claimed that bankruptcy was a necessary step, after years of declining population and the disappearance of manufacturing jobs. The city has been unable to pay back its debts and is still providing minimum levels of service, such as police and fire protection.
The bankruptcy case is set to come up in July between the city and its creditors.
[Detroit Free Press]
[Bloomberg]
