Kevyn Orr testifies DIA art could help city, but stops short of suggesting sale

Source: Detroit Free PressOct.儲存 29--Detroit Emergency Manager Kevyn Orr said Tuesday he does not recall ever asking the state directly for funding to help the city deal with its spiraling financial crisis and debts that exceed an estimated $18 billion.During his third day on the stand in Detroit's historic bankruptcy trial attorneys for creditors asked Orr if he remembers ever asking Gov. Rick Snyder for financial help to avoid potential cuts to the pensions of the city's 23,500 retirees, even though the city's pension funds are underfunded by an estimated $3.5 billion."I don't recall asking for assistance in that form," Orr said.That prompted U.S. Bankruptcy Judge Steven Rhodes to challenge Orr."I know there was a dialogue (with the governor) and it became clear there would be no assistance from the state," Orr said.Orr's testimony drove home what has been crystal clear in Detroit's bankruptcy case: There will be no direct funding from either the state or federal level to help Detroit restructure its debt.In questioning on Tuesday, it became equally clear that Orr recognized that reality early on in his tenure as Detroit's emergency manager.Attorneys for creditors, who are challenging Detroit's eligibility for bankruptcy protection from creditors, attempted on Tuesday to gather evidence that will prove that the city did not exhaust all possible options before it became the largest city to file for Chapter 9 bankruptcy on July 18.Earlier today, questions from lawyers and Orr's testimony touched on the timing of the bankruptcy filing and the possible sale of art from the Detroit Institute of Acts. Orr acknowledged that if the art held by the DIA is worth billions of dollars, it could help the city. But he dodged questions about his desire to use the art to help restructure the city's debt."It is valuable, I do not know if it is a potential source of cash for the city," Orr said in testimony in U.S. Bankruptcy Court during a trial that will determine if Detroit is eligible for bankruptcy protection.The historic trial entered its fifth day today with Orr back on the stand defending pension liability estimates and the timing of the city's bankruptcy filing.As a municipality, Detroit must prove that it is eligible for bankruptcy by proving that it is insolvent, that it negotiated in good faith with its creditors, or that negotiations with creditors became impracticable, or not possible. Unions and retiree groups are arguing the city is not eligible for Chapter 9 protection because it failed to negotiate in good faith. Some say the filing and the emergency manager law are unconstitutional. The city must also prove it is insolvent.Orr also acknowledged that while the art held by the DIA was mentioned in a June 14 report produced for the city's creditors, that report did not account for the potential benefits of selling the art.Anthony Ullman, an attorney representing Detroit's creditors, asked Orr today if the city could get billions in return for the art, would that help the city restructures its debt."Yes, I think it would," Orr said.In recent weeks, the discussion surrounding the DIA art has shifted fro迷你倉 outright sales to leveraging -- ways of squeezing cash out of the masterpieces at the museum without necessarily relinquishing ownership. The most-talked-about options include using art as collateral, renting big chunks of the collection to other museums or a DIA-proposed plan for the state to contribute hundreds of millions of dollars to the city's restructuring in exchange for new statewide traveling exhibitions and education programs.Detroit has hired Christies auction house to assess the value of the art and is expecting a report within the next few weeks. Among the museums holdings are valuable works by Van Gogh, Matisse, Rembrandt, Bruegel and hundreds of others.Michigan Attorney General Bill Schuette's has issued a formal opinion stating that a forced sale of art would be illegal because the work is held in the public trust, though it remains unclear whether this legal reasoning will hold up in bankruptcy court. The DIA, too, has vowed to fight any sale or any plan that puts the collection at risk.Attorneys grilled Orr on the estimate of the debt owed by the city's pension funds when it filed for bankruptcy on July 18.Orr said a city-retained actuarial firm did not complete a fresh analysis of the health of the two pension funds until September. But, he said, that does not mean the $3.5 billion figure his team is using is not accurate."It is preliminary until we reached an agreement on what the numbers are," Orr said. This represented our best analysis of what those numbers are."Ullman also asked Orr if federal bankruptcy law trumps state protection of pension rights."I generally was aware that federal law takes precedence over state law," Orr said, but added that he is not aware of any specific cases where federal law has resulted in pension cuts that are protected by a state constitution.Orr, who before being named emergency manager worked as a bankrupcty lawyer for Jones Day in Washington, D.C., also said he was unaware of any conversations in March 2012 between Jones Day and the state of Michigan about the potential for Detroit to file for bankruptcy. Orr was hired in March of this year.Ullman showed Orr an email that said Jones Day evaluated whether the state's emergency manager law could withstand a challenge if an emergency manager decided to file bankruptcy on Detroit's behalf."I just learned now that Jones Day had involvement in March 2012," Orr said. "I never heard it from anybody at Jones Day."Ullman also pressed Orr about the timing of Detroit's bankruptcy filing, which occurred on July 18, just minutes before a hearing in an lawsuit against the city was about to begin in Ingham County Circuit Court. Exhibits presented during testimony today showed that the city was planning to file for bankruptcy on July 19."Once I sent the letter to the governor I was ready," to file for bankruptcy, Orr said. "As I had said before, that things were beginning to spiral out of control...There were a number of reasons besides the implication of your question."Copyright: ___ (c)2013 the Detroit Free Press Visit the Detroit Free Press at .freep.com Distributed by MCT Information Services儲存倉