CHICAGO -- U.S. Bankruptcy Judge Steven Rhodes tapped Boston-based Martha Kopacz of Phoenix Management Services LLC to act as a municipal finance expert witness to review Detroit's bankruptcy exit plan.
Rhodes also named Richard Ravitch as the court's non-testifying, and unpaid, consultant on issues of municipal finance and viability.
Kopacz and Ravitch were among the five candidates the judge and various attorneys interviewed in open court on April 18 for the expert witness position. Rhodes announced his decision early Tuesday.
As an expert witness, Kopacz will be required to testify as to the feasibility of Detroit's plan of confirmation and whether the assumptions that underlie the city's cash-flow projections and forecasts are reasonable.
Phoenix Management Services provides turnaround services and interim management, investment banking and transaction advisory services to a variety of entities. Kopacz, a senior managing director at the firm, said in her application that she has more than 30 years of reorganization experience, and that she was one of the "first financial advisors to apply turnaround principles to public sector and not-for-profit organizations."
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.
Kopacz has advised the Nassau County Interim Finance Authority in its oversight role over Nassau County, N.Y., and acted as chief restructuring officer on the out-of-court reorganization of the Legal Aid Society.
Before working at Phoenix, she founded a boutique advisory firm called Brant Point Advisors. Before that she was co-founder and co-leader of the U.S. Corporate Advisory and Restructuring Services practice at Grant Thorton LLP, where she also led public sector initiatives.
The firm has served as consultants to many distressed entities and governments, including Wilmington, Del.; Nassau County; 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. The budget includes hourly rates ranging from a top fee of $595/hour to a low fee of $200/hour for analysts. Kopacz said she thought she'd need four full-time professionals working for eight to 10 weeks to complete the assignment.
"It is vitally important that the city of Detroit, its residents and stakeholders, emerge from the Chapter 9 process with confidence in the plan of adjustment and a reasonable expectation that the commitments made therein will be met," she wrote in the application. "The 10-Year Plan, upon which I would opine, should be the basis for that reliance and I welcome the opportunity to contribute to the process of revitalizing the city."
Kopacz told Rhodes during Friday's interview that if hired, neither she nor her team would be "bamboozled" by fuzzy numbers.
In her application, Kopacz said cities in general need to engage in more long-range planning. They also need to improve financial reporting so that it's consistent and understandable, she said.
She said her team may be able to help improve the forecasts and projections that are a key part of Detroit's recovery, as revenue forecasts are "part art and part science."
Ravitch, a former New York lieutenant governor who helped oversee the resolution of New York City's near-bankruptcy in the late 1970s, was tapped by Rhodes to serve as a court consultant on "issues of municipal finance and viability," according to the judge's order. Rhodes said all the bankruptcy's parties should promptly cooperate with any requests made by Ravitch.
In his application, Ravitch offered to work for free but proposed a budget of around $950,000 for the rest of his team. In his new role, he will be working pro bono.
In addition to Kopacz and Ravitch, the applicants included Chicago-based restructuring consultant William Brandt, head of Development Specialists and chairman of the Illinois Finance Authority; Dean Kaplan of Public Financial Management Inc; and Wayne State University law professor Peter Hammer.
Rhodes said Friday that he wants a report on the plan by June 24. A trial on the final plan of confirmation is expected to begin on July 24.
