CHICAGO - Detroit needs a stronger governance structure to avoid another bankruptcy in the future, the city's chief financial officer said.
"There has to be much greater strategy around the recovery process," Detroit CFO John Hill said. "The post-bankruptcy structure is absolutely critical and that's a big question mark."
Hill spoke Wednesday in Chicago at a forum sponsored by the Civic Federation and the Federal Reserve Bank of Chicago, "After Detroit: How Will Illinois and Its Communities Respond?"
Oversight will be key, he said.
Hill noted that U.S. Bankruptcy Judge Steven Rhodes could impose restrictions on the city's plan of adjustment or appoint a court monitor. Gov. Rick Snyder may appoint a financial review board, or even another emergency manager. November gubernatorial elections could bring another set of changes, he said.
"The end of September is not a long time from now," said Hill, referring to the exit date of current emergency manager Kevyn Orr. "I'm waiting with bated breath to see what kind of structure comes, because it will have a big impact on how I do my job."
Hill, who took over as the city's CFO last November, said he reports directly to emergency manager Kevyn Orr, with a "dotted line" to Mayor Mike Duggan. A native of Washington DC, Hill was the executive director of the Congressionally appointed Financial Control Board, which took over the district during its fiscal crisis.
State and local officials and the bankruptcy court itself are all focused on ensuring that Detroit's long-term plan remains viable as the city emerges from the country's largest Chapter 9 to date, the CFO said.
"There's no question the EM is always concerned about the sustainability of the plan, and that's something the court will also take a look at," Hill told reporters after his talk. He noted that Rhodes had just hired a pair of municipal finance experts to help him review the feasibility of the plan.
"No one wants to get out of bankruptcy then get back into it."
Hill said he's focused now on the 10-year plan, which calls for a $1.5 billion investment in infrastructure and services. The current plan calls for the city to spend $150 million a year.
"We look at the plan of adjustment as the creditors and employees and pensioners giving the city the authority to invest $1.5 billion that would have gone to them in order to improve the city," he said.
The city is expected to release an updated plan of debt adjustment on Friday.
Hill talked at length about the need for new financial control systems that will help keep the city on track in the future. The current financial systems are nearly 13 years old and lack the critical ability to craft long-term revenue projections.
The city relies on consultants to craft its five-, 10- and 40-year revenue projections, said Hill.
"The engagement of consultants is very important to Detroit because we don't have the systems or the ability to make those projections," he said. "So consultants, to me, they really can be a very major part of the recovery."
On stalled plans to privatize the Detroit Water and Sewerage Department, Hill said a deal needs to be made before Orr exits office, because it would probably depend on powers that only an emergency manager has.
