CHICAGO - Detroit's proposed plan of adjustment to deal with its $18 billion debt load is feasible, the municipal finance expert witness hired by the federal bankruptcy court to assess the plan believes.
"It is likely that the city of Detroit, after the confirmation of the Plan of Adjustment, will be able to sustainably provide basic municipal services to the citizens of Detroit and to meet the obligations contemplated in the Plan without the significant probability of a default," concludes the report from Martha Kopacz and her team at Phoenix Management Services.
Kopacz, a senior managing director, was charged with assessing whether the assumptions that underlie the city's cash-flow projections and forecasts are reasonable and its overall plan to deal with city debts and exit Chapter 9 is feasible.
Bankruptcy Judge Steven Rhodes cleared release of the 226-page report to creditors and other participants in the historic Chapter 9 case on Friday but it was not immediately made public. It was obtained by The Bond Buyer.
Rhodes chose Kopacz to review the city's proposed plan of adjustment in April.
The report also noted that "by most accounts, there is forward progress being made in the city" on the administrative front with the team finding that the combined efforts of Emergency Manager Kevyn Orr and Mayor Mike Duggan "are addressing service shortfalls."
The team reached its conclusion on the plan's feasibility after extensive interviews with various parties involved in city management, the bankruptcy, and the plan of adjustment and the review of hundreds of relevant documents and models, independent research and analysis.
The report offers some qualifications and raises concerns on projections in some areas, making suggestions that could enhance the feasibility of the plan.
The standard Kopacz and her team used in determining the plan's feasibility was based on the question: "Is it likely that the city of Detroit, after the confirmation of the Plan of Adjustment, will be able to sustainably provider basic municipal services to the citizens of Detroit and to meet the obligations contemplated in the plan without the significant probability of a default?"
The report concludes that the projections are generally mathematically correct and materially reasonably and "therefore fall within the feasibility standard" as defined by the team.
The report further finds that the individual assumptions used to build the projections fall into a reasonable range and when taken as a group is "also reasonable and fall within the feasibility standard."
Creditors faced a deadline earlier this month to vote on the plan of adjustment and the city was expected to release the results on Monday. The bankruptcy court trial on the plan is slated to begin August 14.