CHICAGO — Detroit bankruptcy Judge Steven Rhodes' decision to hire a municipal finance expert to review the city's bankruptcy plan attracted responses from five professionals, including a few well-known public finance figures.
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Each hopes to be hired by Rhodes to act as a municipal finance expert witness to independently review the long-term feasibility of Detroit's plan to exit the largest municipal bankruptcy in the U.S. and rebuild the struggling city.
Rhodes will interview the applicants in open court on April 18. Two attorneys — Guy Neal, who was the financial creditors' nominee, and Barbara Patek, labor's nominee — will help with the interviews. The city is also allowed to appoint one attorney to participate.
Ravitch served as Lieutenant Governor of New York in 20910 under former Governor David Patterson. Ravitch was also a representative of the New York governor during NYC's fiscal crisis in the 1970s, and negotiated with underwriters, union and business leaders during "the darkest hours of the [city's] fiscal crisis."
He was chair of New York State Urban Development Corp., a member of the board of the New York State Municipal Assistance Corp., and chair of the New York State Metropolitan Transportation Authority. Ravitch oversaw the issuance of more than $14 billion of municipal debt, according to his application. He was part of negotiations with President Gerald Ford to win short-term financing for the city, and helped with the creation of the city's four-year financial plan.
Along with Paul Volcker, Ravitch created the State Budget Crisis Task Force in 2012. Ravitch also sits on the board of directors at Build America Mutual, according to his resume.
"New York City's elaborate financial plan is not unlike Detroit's plan of adjustment," Ravitch wrote in his application.
His team would include Carol O'Cleireacain, a senior public sector financial executive at his firm who was Deputy State Treasurer in New Jersey in 2006.
He offered his services pro bono, but with compensation for his colleagues, the proposed budget would total $965,175. That would include reimbursing the principals at $750 an hour, according to the application.
Dean Kaplan, from Public Financial Management, also applied for the position, in which he would lead a team made up of the firm's employees. Kaplan is a managing director with PFM's Management & Budget Consulting practice and leads the practice's turnaround services.
All of PFM's 500 employees and 25 management and budget consultants "stand ready to meet the court's schedule," the application says.
"Our team has years of practical experience in working with distressed cities as former officials and hands-on advisors," Kaplan wrote. "We have more than just an academic or professional trade group view of municipal finance — we have been in the trenches as municipal finance officials and appointed financial overseers, and understand the real-world dimensions of what is feasible and what is not in achieving a sustainable recovery."
Kaplan is a former budget director for Philadelphia, and has worked on the restructuring of cities like Pittsburgh, Washington, Cleveland, Miami and Baltimore. PFM, one of the largest financial advisory firms in the country, is currently the advisor to Detroit Public Schools, and works as the FA to several Michigan state issuers, including the Department of Transportation, the Michigan Finance Authority, and the Tobacco Settlement Finance Authority.
The proposed budget would pay Kaplan $550/hour with the rest of the executive rates ranging from $450/hour to $275/hour.
Peter Hammer, a professor of law at Wayne State University Law School and Director of the Damon J. Keith Center for Civil Rights, also applied for the job.
In his application, Hammer said he examines "questions of economic development as well as issues of race in America through the lens of complex adaptive systems and institutional economics."
He admitted that he does not have the municipal finance background that Rhodes has said he wants, but added that "people who have such specialized training" may lack the ability to analyze the city's plan from a broader perspective because "creating a viable city requires much more than balancing revenue and expenses in a narrow accounting framework."
In 2008, Hammer was the city's lead witness in the governor's removal proceedings against former Detroit mayor Kwame Kilpatrick, offering testimony where he evaluated various settlement and confidentiality agreements, his application said.
Hammer said he would accept "whatever standard fee" the court would set and would do most of the work himself.
"The feasibility of the plan of adjustment is an economic question embedded in a deeper social context with complementary and competing systems of education, housing, health care and commerce," Hammer wrote. "While a narrow expertise in municipal finance and planning is a necessary component, such expertise alone is not sufficient for a comprehensive economic assessment of the feasibility of the city's proposed plan."
William Brandt, the president and CEO of DSI Civic Financial Restructuring LLC, a municipal restructuring and consulting firm, and Illinois Finance Authority board chairman, also threw his hat in the ring.
The firm is an affiliate of Development Specialists Inc., which has offices in several locations across the country. Brandt opened the civic branch in 2011 with former Illinois budget director and chief operating officer John Filan. Filan will also be on the team if hired for the position.
Brandt's team includes: Geoffrey Berman, senior vice president at Development Specialists who was the former president of the American Bankruptcy Institute; Steven Victor, former Act 47 Plan Co-Coordinator for the city of Altoona, Pa., and a qualified emergency financial manager in Michigan; Robert Weiss, general counsel at Development Specialists and former senior partner at Honigman Miller Schwartz and Cohn LLP; and Paul Vallas, a former CEO of the Chicago Public Schools and Chicago budget director who is currently the running mate of Democratic Illinois Gov. Pat Quinn. Brandt hired Vallas in April as a senior consultant.
The proposed budget totals just under $1.6 million, with an additional $190,000 for expenses. The hourly rates range from $625/hour to $425/hour for senior consultants.
"I view the opportunity to serve the court as its expert witness in this matter on the issue of feasibility as a simple and natural extension of the efforts in which both I and the team at DSI Civic have been engaged over the past seven years: That of trying to apply our special skills and hard-won experience to the analysis and rejuvenation of the former great manufacturing cities that border the Great Lakes."
Martha Kopacz, with Phoenix Management Services LLC, an advisory firm that provides turnaround services and interim management, investment banking and transaction advisory services to a variety of entities, is another competitor.
Her team includes Bob Childree, who was comptroller of the state of Alabama for more than 20 years, through April 2009. The team also includes Albert Mink, who served as interim CFO for the Philadelphia Gas Works during its high-profile reorganization.
The firm has served as consultants with many distressed entities and governments, including the city of Wilmington, Delaware; Nassau County, N.Y.; the Philadelphia Gas Works; and the Southeast Pennsylvania Transportation Authority.
The Phoenix application features a two-page overview of its proposed approach to the job. Their budget includes hourly rates ranging from a top fee of $595/hour to a low fee of $200/hour for analysts.
