Detroit tells residents, creditors it's ready to invest again

The city of Detroit is working with PR firms Duffey Petrosky and Abernathy MacGregor to convey that it is ready to make investments in services it has neglected over the last several decades.

DETROIT: The city of Detroit is working with PR firms Duffey Petrosky and Abernathy MacGregor to convey that it is ready to make investments in services it has neglected over the last several decades.

The city filed an adjustment plan late last month for exiting the largest municipal bankruptcy in US history.

The firms’ primary target is the city’s 700,000 residents, according to Bill Nowling, Duffey's director of public affairs and issues management. However, outreach also includes the local and national political audience and the 22,000 retirees, bondholders, and various institutions that hold the city’s debt.

"We have spent an enormous amount of time coming up with a very specific and detailed plan of adjustment that tries to treat all of our creditor classes as fairly as possible, keeping in mind that the number one priority of the city is to continue to provide and improve services for its residents," said Nowling. "That is the whole point of going into bankruptcy."

Under the plan, pensions have been cut by nearly one-third for non-uniformed retirees, and bondholders are being repaid just $1 of every $5 owed to them by the city. Pensions for police and firefighters are also being slashed by 10%. In addition, the city is proposing to spend $1.5 billion over 10 years on capital improvements, blight removal, and equipment upgrades.

The plan follows Detroit's bankruptcy filing from last July, citing more than $18 billion in debt and liabilities, including $5.7 billion in unfunded retiree health insurance and $3.5 billion in unfunded pension payouts for 20,000 retirees and 10,000 current city workers.

Duffey Petrosky has been working with the city since last March, when Detroit emergency manager Kevyn Orr brought the firm on to communicate the steps it was taking to restructure its debt.

As part of its contract, Nowling is working as an in-house spokesman for Orr. At Nowling's suggestion, Orr's office also brought on Abernathy to conduct outreach to stakeholders in the financial services industry. Nowling is overseeing Abernathy's work.

Abernathy MD Chuck Dohrenwend declined to comment.

"No other PR agencies have been brought on to aid the city since March," said Nowling.

As the city’s pecuniary situation has evolved over the past year, so have the outreach messages.

"Last March, we had to explain how dire the situation was in Detroit financially and how the city got to that point; when we filed for bankruptcy, the message changed to explaining what the bankruptcy protection allows us to do," Nowling said. "Now that we have filed a plan of adjustment, our message focuses on what we think needs to happen for the city to exit bankruptcy."

As of July, Detroit had capped the potential spending on the two PR firms at a combined $115,000, according to city records. Nowling said the budget for the two agencies is no longer limited, but he declined to say how much they are being paid.

"Our budget is based upon a budgeted model over a period of time," he explained. "If we are still in the process of providing work, then we need to renegotiate."

The plan is subject to negotiations in federal bankruptcy court.

Representatives from the Detroit city government declined to comment.

 

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