Detroit's roadmap to reemerge from bankruptcy

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Detroit's roadmap to reemerge from bankruptcy
In this July 16, 2013 aerial file photo, the downtown of the city of Detroit is shown. Detroit Emergency Manager Kevyn Orr raised more than a few eyebrows a year ago when he took the city into bankruptcy and predicted it would be out by the time his term expired in fall 2014. Because it is by far the largest city to file for municipal bankruptcy and the issues were so complex many experts predicted it would take years to resolve. But the city will take a major step toward that goal with a trial in federal bankruptcy court that starts Tuesday, Sept 2, 2014. (AP Photo/Paul Sancya, File)
A sign on a rental truck is shown as retirees protest near the federal courthouse in Detroit, Thursday, July 3, 2014. Ballots submitted by city workers, retirees, pensioners and other creditors likely will determine how quickly Detroit exits its historic bankruptcy. The city’s two pension groups _ grudgingly _ have been pushing their members to vote “yes” on a restructuring plan that seeks to cut their income. Rejection of the plan could lead to what’s known as a cram down and steeper reduction in pension payments. (AP Photo/Paul Sancya)
FILE - In an Oct. 10, 2013 photo is a manhole cover is seen in Detroit. The city, which was about to default on a good chunk of a long-term debt exceeding $18 billion, now is getting a second chance in a federal bankruptcy court-led restructuring. (AP Photo/Carlos Osorio, File)
In a photo from Thursday, Feb. 20, 2014 is the monument to the boxer Joe Louis in Detroit. Detroit's emergency manager filed a plan Friday, Feb. 21, 2014 to restructure the city's $18 billion debt by making cuts to pensions and creditors while offering a blueprint for emerging from the largest municipal bankruptcy in U.S. history. (AP Photo/Carlos Osorio)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator tears down a house in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
A excavator removes debris from a demolished house next to a house with a foreclosure notice in Detroit’s Brightmoor area Monday, March 24, 2014, in Detroit. For years, Brightmoor area residents pleaded with the city to demolish vacant homes that scavengers have stripped of wiring and plumbing and anything of value. Some structures are already gone, and now officials aim to do much more, possibly tearing down as many as 450 empty houses each week across more than 20 square miles of this bankrupt city _ a vast patchwork of rotting homes comparable to the size of Manhattan. (AP Photo/Paul Sancya)
FLINT, MI - MAY 13: Scott Hempeo (L) and Tyler Bienlein work with Habitat For Humanity workers at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Tyler Bienlein (C) and Mastercard employees work at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Habitat for Humanity, Mastercard employee's and speakers pose with Scott Hempeo (LC) and Tyler Bienlein (RC) at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Congressman Dan Kildee (L) speaks to employee's at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: Scott Hempeo and Tyler Bienlein work with Habitat For Humanity workers at the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
FLINT, MI - MAY 13: General view during the Habitat For Humanity And MasterCard Create Affordable Housing To Support Small Business Owners on May 13, 2014 in Flint, Michigan. (Photo by Scott Legato/Getty Images for MasterCard)
United Auto Workers (UAW) members applaud during a news conference at the General Motors Co. assembly plant in Flint, Michigan, U.S., on Monday, Dec. 16, 2013. General Motors Co., amid a push to refresh most of its U.S. lineup, said it plans to spend $1.3 billion to upgrade five U.S factories on top of the $1.5 billion already announced this year. Photographer: Bryan Mitchell/Bloomberg via Getty Images
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 15: A view of the City of Detroit, Michigan, USA, on January 15, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
DETROIT, MI- JANUARY 16: A view of the City of Detroit, Michigan, USA, on January 16, 2014. The US city of Detroit, once a symbol of US industrial power, filed for bankruptcy, with debts of $18.5 billion on July 18, 2013, which makes Detroit the largest city in US history to do so. (Photo by Cem Ozdel/Anadolu Agency/Getty Images)
This photo shows a row of abandoned houses, Thursday, Sept. 26, 2013 in Detroit. Four of President Barack Obama's top advisers will converge on Detroit Friday to meet privately with state and local leaders about ways the federal government can help the bankrupt city short of a bailout. The White House said Thursday that top economic adviser Gene Sperling will join U.S. Attorney General Eric Holder, Transportation Secretary Anthony Foxx and HUD Secretary Shaun Donovan in the closed meeting. (AP Photo/Carlos Osorio)
DETROIT, MI - SEPTEMBER 04: Remnants of Detroit's historic Eastown Theatre are seen on September 4, 2013 in Detroit, Michigan. The theatre operated as a movie theater, music venue and church off-and-on from 1931 until 2004; the building could seat 2,500 people. Since 2004 it has been abandoned and fallen into disrepair. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Ruins at the abandoned Packard Automotive Plant are seen on September 4, 2013 in Detroit, Michigan. The Packard Plant was a 3.5 million square foot car manufacturing plant built completed in 1911. Major operations ceased in 1958, though the plant was used in a limited capacity until the 1990s, with outer buildings used through the mid 2000s. Since then the buildings have fallen into disrepair - they are now used mostly for graffitti artists and scavengers. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Tony Brown, a homeless man, takes a nap as members of the Detroit Fire Department fight a two-alarm fire that broke out in an abandoned building down the street on September 4, 2013 in the Six Mile Gratiot neighborhood of Detroit, Michigan. Detroit has an estimated 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: Tony Brown, a homeless man, smokes a cigarette as members of the Detroit Fire Department fight a two-alarm fire that broke out in an abandoned building down the street on September 4, 2013 in the Six Mile Gratiot neighborhood of Detroit, Michigan. Detroit has an estimated 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. (Photo by Andrew Burton/Getty Images)
DETROIT, MI - SEPTEMBER 04: A wild dog wanders through Detroit's historic Eastown Theatre are seen on September 4, 2013 in Detroit, Michigan. The theatre operated as a movie theater, music venue and church off-and-on from 1931 until 2004; the building could seat 2,500 people. Since 2004 it has been abandoned and fallen into disrepair. Detroit has an astonishing 78,000 abandoned buildings across its 142 square miles. Last month the city declared bankruptcy, the largest municipality to ever do so in the United States. The city has recently also struggled with packs of wild dogs roving the streets. (Photo by Andrew Burton/Getty Images)
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DETROIT (AP) - Detroit presented its first full road map for leaving bankruptcy Friday, outlining an elaborate plan to restructure $18 billion in debt, demolish thousands of blighted homes and invest in the broken-down infrastructure that has made the city a symbol of urban decay.

If approved by a judge, the wide-ranging proposal would sharply reduce payments to some retirees and creditors. Pension holders could expect to get 70 percent to 90 percent of what they are owned, while many banks would receive as little as 20 percent.

The plan, which is sure to be the subject of court challenges, envisions a leaner, cleaner and safer Motor City after its crushing financial burdens are lifted.

"There is still much work in front of all of us to continue the recovery from a decades-long downward spiral," Kevyn Orr, the city's state-appointed emergency manager, said in a statement.

Orr's so-called plan of adjustment "provides the best path forward for all parties to resolve their respective issues and for Detroit to become once again a city in which people want to invest, live and work."

The state is focused "on protecting and minimizing the impact on retirees, especially those on fixed, limited incomes," Gov. Rick Snyder said, as well as "restoring and improving essential services" and "building a foundation for the city's long-term financial stability and economic growth."

The governor called the plan "a critical step forward." But it leaves unanswered many questions, including whether creditors and labor unions will accept the deal or fight it, and how long that process might take.

The package calls for awarding police and fire retirees at least 90 percent of their pensions after eliminating cost-of-living allowances. Other retirees would receive at least 70 percent.

It still doesn't seem fair to Janice Pegg, 67, who receives the pension left by her husband, Victor, a Detroit police officer who died two years ago.

"He earned these benefits through his hard work, through his labor, through wage freezes back when he was employed," Pegg said. "I thought that that would be money I would be able to take care of myself."

Orr has said he would like the city to emerge from the nation's largest municipal bankruptcy by the fall, when his term is up.

Bankruptcy attorney and St. John's University law professor Anthony Sabino said the plan could spark an argument between city workers and retirees and police and firefighters.

Orr "wants to have the firefighters and police have 90 percent and other city workers cut back to two-thirds," Sabino said Friday. "The other unions will say, 'Even if we're uneven, we should be closer.' It does create an inequity that is going to have to be addressed in court."

Detroit's woes have piled up for generations. In the 1950s, its population grew to 1.8 million people, many of whom were lured by plentiful, well-paying auto jobs. Later that decade, Detroit began to decline as developers starting building suburbs that lured away workers and businesses.

Beginning in the late 1960s, auto companies began opening plants in other cities. Property values and tax revenue fell, and police couldn't control crime. In later years, the rise of autos imported from Japan started to cut the size of the U.S. auto industry.

By the time the industry melted down in 2009, only a few factories from GM and Chrysler were left.

Detroit lost a quarter-million residents between 2000 and 2010. Today, its population could fall as low as 680,000, according to Orr.

Of the city's $18 billion in debt, about $12 billion is unsecured, Orr said, meaning there is no tax revenue or other money to pay it.

The city wants to spend $500 million to knock down up to 450 decaying, abandoned properties each week. Those buildings are Detroit's most visible eyesores and magnets for criminal activity.

As they demolish problem properties, officials want to reinvest by giving police, firefighters and ambulance crews better equipment that will produce faster response times. The plan also calls for fixing the city's troubled electrical grid and street-lighting system, which has deteriorated to the point where many neighborhoods descend into blackness every night after sundown.

"It's critical that we leave the city in a fashion that it doesn't have to come this way again," Orr said.

Wayne State University law professor John Mogk, an expert on land-use planning and urban development, said a post-bankruptcy Detroit "will be on much firmer ground."

One of the touchiest issues is the fate of about 2,800 city-owned treasures in the Detroit Institute of Arts. Those masterpieces have been at risk of being auctioned to raise money to repay creditors.

Foundations and others have pledged $365 million toward pensions to keep the art from being sold. The governor has said he will seek $350 million from the state to aid that cause, while the museum raises $100 million.

But that money depends on both pension systems approving Orr's plan. The foundations "are looking to get this thing done," Orr said.

Orr had hoped creditors would sign off on the plan before he submitted it to U.S. Bankruptcy Judge Steven Rhodes. But the clock was ticking because Rhodes had set a March 1 deadline.

The proposal still faces numerous obstacles, and most aspects are still being negotiated in mediation sessions with stakeholders.

A vote in favor of the plan by one class of creditors would be enough to send it to the judge, who would then hold trial-like hearings to determine if the proposal should be approved over the objections of other creditors.

Appeals are almost sure to persist even after the final version is endorsed by a bankruptcy court.

___

Associated Press writers Mike Householder, Tom Krisher and Ed White contributed to this report.

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