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Detroit Judge Ready to Tap Muni Expert Witness

APR 21, 2014 4:23pm ET
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CHICAGO -- U.S. Bankruptcy Judge Steven Rhodes was poised to announce the selection of a municipal finance expert as soon as Monday to help him analyze the feasibility of Detroit's bankruptcy plan.

Rhodes interviewed five candidates who applied for the high-profile position in open court on April 18. The judge said he wants to hire one -- or more -- expert witnesses 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 said Friday that he wants a report on the plan by the end of May or mid-June. A trial on the final plan of confirmation is expected to begin in late July or early August.

The applicants include former New York Lt. Gov. Richard Ravitch, who helped oversee the resolution of New York City's near-bankruptcy in the late 1970s. Chicago-based restructuring consultant William Brandt, head of Development Specialists and chairman of the Illinois Finance Authority, is also vying for the position, as is Martha Kopacz of Phoenix Management Services, Dean Kaplan of Public Financial Management Inc., and Wayne State University law professor Peter Hammer.

Ravitch said during his interview that Detroit's struggles reflect larger national problems, according to Detroit Free Press reports of the court interviews. But he added that the Motor City's woes are more severe than New York City's were.

"I think it's fair to say Detroit's problem is more severe because the problem wasn't addressed earlier on, when it would have been far less expensive to solve it," said Ravitch, 80. "This is a national problem," he said. "If I can help, it's better than a dozen more golf games this summer."

Ravitch said one of his first tasks would be to review the city's numbers, determine how it arrived at them, and whether they would be sustainable after the bankruptcy. He said he would want to meet with Detroit Mayor Mike Duggan, who Rhodes last week also said would be key to the success of a post-bankrupt Detroit.

PFM's Kaplan leads turnaround services for the firm's Management & Budget Consulting practice. He's a former budget director for Philadelphia, and has worked on the restructuring of cities like Gary, Ind., Pittsburgh, Washington, Cleveland, Miami and Baltimore. When Rhodes asked why he wanted the job, Kaplan said, "This is what we do." He also said during his interview that part of the reason Gary is still suffering is because the city failed to craft a "comprehensive, long-term view of where they wanted to be and how to get there."

Rhodes noted that Brandt's proposed $1.6 million budget is significantly higher than the other bids. Brandt said the price could be trimmed a bit, but that "no one should be under the illusion it can be done for a buck and a half," according to the Detroit Free Press. Brandt said his team's experience was "unparalleled" when it comes to urban planning.

"This plan, if it works, offers Detroit a future," Brandt said.

Brandt also noted that he and his wife are friends with Graham Beal, the director of the Detroit Institute of Arts, which has been mired in one of the most controversial aspects of the case.

Kopacz told Rhodes that if hired, neither she nor her team would be "bamboozled" by fuzzy numbers. She said she would spend the first few weeks on a "listening tour," then spend the next month to analyze the numbers. She defined feasibility as the "ability to generate enough cash to meet its obligations," according to the Free Press.

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