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Original article URL: http://bridgemi.com/2014/03/meet-detroits-creditors/
27 March 2014
Banks hold much of Detroit’s fiscal fate, along with nearly 30,000 retirees and city employees worried about their pensions and healthcare.
But little talked about is the far smaller amounts the city owes, like the roughly $110 in deposits it is holding for each of nearly 6,000 residents’ water and sewer service. Then there’s the potential payouts to 2,100 people or businesses suing – or threatening to sue — the city. Another 791 people have filed workers compensation claims. And millions more are owed to about 2,080 vendors that provide goods and services to the city, from health care services for employees to demolition and construction work across Detroit.
Some are owed a few bucks, others more than $1 million.
And though they and some of the biggest creditors are expected to be made whole, all have unwittingly joined the big financiers and thousands of nervous retirees on a list of more than 112,000 creditors.
Bridge is providing a searchable database gleaned from the city’s 3,555 page list, filed with the federal bankruptcy court, of people, properties, businesses and banks identified by Emergency Manager Kevyn Orr as having a financial interest in the city’s bankruptcy filing.
Orr is seeking to restructure the city’s estimated $18.5 billion debt. Because so much of the city’s debt is protected, he’s called for slashing pensions and retiree healthcare and calling on the holders of more than $538.2 million in general tax bonds to take an 80 percent cut. (Because of bankruptcy rules, roughly $5.8 billion in water and sewer department debt is exempt from cuts.)
The complete list of creditors offers a peek into the scope and variety of the city’s debt, with creditors residing in at least 38 states and three Canadian provinces.
What it doesn’t show is how many more people have tiny slices of Detroit debt, typically wrapped into their retirement accounts or private investments. If you have money invested in bond funds with some of the biggest mutual funds in the country – Franklin Resources, Nuveen, Legg Mason, OppenheimerFunds, BlackRock or Vanguard – you likely “own” a tiny slice of Detroit debt. But the Detroit portion of those funds is typically less than 1 percent, according to investment research firm Morningstar, minimizing the impact.
Yet many creditors listed by Orr will be paid in full. Some of the biggest are protected by bankruptcy law. Those most likely to take a cut in what they are owed are city retirees and employees, and a class of bondholders that Orr has decided can take just 20 cents on the dollar. City workers’ unions, retirees, bondholders and their insurers are all contesting their treatment.
Orr, however, says the cuts must be made to balance the city’s budget and allow for hundreds of millions of dollars in new spending on public safety and blight reduction.
The creditor list is a snapshot of a city’s checkbook, a ledger that could shed billions depending on negotiations, future court battles and the rulings of U.S. Bankruptcy Judge Steven Rhodes. It includes the names of retirees, city employees and other creditors. In some cases it just lists addresses, including more than 66,000 parcels the city believes it may owe a property tax refund. It’s not sure, but it listed them nonetheless.
Retirees are slated to take cuts of 10 percent (police and fire) and 34 percent (all other retirees), though they could take smaller cuts if a “grand bargain” is negotiated that produces an infusion of $815 million from the Detroit Institute of Arts, area foundations and the state. The money would go toward pensions and would permanently sever city ties to the DIA’s art collections.
The city is also waiting to see if it can cut a deal with Detroit’s suburbs to lease the water and sewer department, which services roughly 4 million people in in southeast Michigan, to generate new money for Detroit. Those talks have hit a snag.
If you want to know whether potentially Detroit owes you, or someone you know, dive in and take a look.