Kevyn Orr: How Detroit Can Rise Again; Motown’s ‘benevolent dictator’ talks about his fight with creditors and unions, and what the city’s leaders can learn from Miami and Atlanta about revival

Updated August 2, 2013, 7:12 p.m. ET

Kevyn Orr: How Detroit Can Rise Again

Motown’s ‘benevolent dictator’ talks about his fight with creditors and unions, and what the city’s leaders can learn from Miami and Atlanta about revival.


What do northwest Washington, D.C., South Beach Miami and upper Manhattan have in common? Less than 50 years ago, the now vibrant communities didn’t look much different from most of Detroit, says emergency manager Kevyn Orr—whom Gov. Rick Snyder tapped in March to revive the broken Motor City. This is what gives him hope that Detroit can stage a comeback.“D.C. in ’91 was still burned out from the 1968 riots,” recalls the youthful 55-year-old attorney who worked for 22 years in D.C., at the Federal Deposit Insurance Corporation, Resolution Trust Corporation, Justice Department and Jones Day law firm. “You couldn’t go up 7th Street corridor because it was burned out. But now it’s thriving. You have $10 million condos on Shaw, U Street, Cardozo.” Detroit “has that feel” of a rebound.

“I’ve now seen this many times in places that I personally have lived,” he says, including in his hometown of Miami, where he cut his chops after graduating from the University of Michigan Law School in 1983. People wouldn’t set foot in South Beach in the 1980s “because it was both dangerous and boring.” Last year, Miami Heat president Pat Riley bought a penthouse in SoBe for $11.75 million. “I probably should have bought a couple of lots down there,” Mr. Orr quips.

His downtown office overlooks Detroit’s restored waterfront and the redeveloped General Motors Renaissance Center. From this vantage point the city appears almost lustrous, and Mr. Orr exudes a contagious energy and optimism about the future. He plans to navigate the city out of bankruptcy by next fall, when his 18-month term expires, notwithstanding opposition from creditors who want to gut public services and soak taxpayers to get their money back.

The emergency manager’s biggest challenge, however, isn’t negotiating with creditors. Nor is it reviving Detroit’s mid- and downtown business districts, which, he notes, have been growing from the “grass roots” without government planning. Rather, he is concerned with planting the seeds for growth in the outlying neighborhoods where 95% of Detroiters live.

Gov. Snyder asked him to take control of the insolvent city this spring. “Initially, I didn’t want to do the job,” says Mr. Orr, who worked on Chrysler’s bankruptcy in 2009 as an attorney at Jones Day. But “a number of people just explained to me that it’s just judgment calls, common sense,” he says. “And frankly, the city was at such a dire level, it was all upside—unless you’re going to take it to a more corrupt level than it’s ever been.”

As a footnote: Former Mayor Kwame Kilpatrick and city councilwoman Monica Conyers were recently convicted of corruption. Separately, Kilpatrick charged more than $200,000 of party expenses on his city-issued credit card, which he probably figured would go unnoticed given the government’s sloppy accounting. Though newspapers reported the expenses in 2005, he was re-elected anyway. Detroit’s ex-treasurer and several pension-fund trustees have also recently been indicted in a pay-to-play scandal.

Unions have criticized Mr. Orr’s appointment as undemocratic, though the concept of receivership originated in English common law and Mr. Orr is responsible to the governor, who is elected. “People say I’m a dictator,” Mr. Orr chuckles. “I don’t appreciate that, but if I’m going to be one, I’m going to be benevolent.”

In June Mr. Orr proposed an ambitious plan to slash the city’s $18 billion debt—which includes $9.2 billion in unfunded retirement liabilities—to reduce taxes, and to reinvest in services. “I went to the labor class and asked, ‘Please, let’s negotiate.’ They sued the governor and treasurer. Next week another union joined them on that lawsuit. The next week, they sued me and the governor,” he recalls. “How long do I have to stay on the schoolyard when you’re hitting me on the upside of the head and then you run to the teacher and say I won’t be your best friend? This is fifth grade stuff.”

To escape the bullying, he filed under Chapter 9 of the United States Bankruptcy Code, which shields debtors from litigation. But the bankruptcy shouldn’t have been a surprise to anyone, he notes—least of all to Detroit residents: “You can’t have 20-year-old oak trees growing through the roofs of houses and not notice that there’s some blight.”

Capital-market creditors are crying foul at Mr. Orr’s plan to treat general obligation, or GO, bonds as unsecured despite being backed by the city’s “full faith and credit”—which creditors should have realized doesn’t count for much. Investors warn that he is setting a precedent that could raise borrowing costs for municipalities everywhere.

“I’ve read all the articles about how this is a breach of the GO bond market covenant, and this is going to shift the earth, turning on its axis, and cats and dogs will start holding hands and start walking down the street together if I do this,” he laughs.

But Mr. Orr says his primary responsibility is to the city’s 700,000 residents, not its capital market creditors and 30,000 retirees and workers. Despite vocal union opposition, he believes he has support from the silent majority. “The vast majority of people are like, ‘We just want it fixed even if we don’t like the emergency manager.'”

In the 120 days since he started, things have already begun looking up. The city plans to start hanging new streetlights and clearing dilapidated houses later this month. It has placed orders for new Tasers, vests, cars and PCs for the police department, and intends to contract out garbage collection to save $15 million per year.

“I prefer to think of it as ‘upgrading’ because some of these services are anachronistic,” says Mr. Orr. “What big city still does some of these services?”

An overarching problem is that Detroit is a 20th-century city competing—forget competing, it’s just trying to function—in a 21st-century world. “Our Internet system is 10 years old,” Mr. Orr notes. Most records are booked manually.

One glimmer of progress is Detroit’s revitalized midtown and downtown, where venture capitalists and private foundations are investing billions. Quicken Loans chairman Dan Gilbert moved his company’s headquarters to Detroit in 2010 and has attracted 85 other companies to downtown through his Rock Ventures enterprise that provides office space for startups.

Rock Ventures alone has created 5,600 jobs in Detroit’s urban core. Its posh M@dison building is an “incubator” for 32 tech companies, such as app developer Detroit Labs. It’s the kind of place where young people in T-shirts and shorts chill in beanbag chairs with their laptops, while nearby a few guys play ping pong (without the beer).

Due to the youthful influx, Detroit’s night-life and culture are experiencing a renaissance. Local entrepreneur Larry Mongo—whose celebrity scored him a bit part in Ryan Gosling’s upcoming film “How to Catch a Monster”—recently reopened his 1920s-speakeasy-style Cafe d’Mongo’s, which he had closed in the 1990s because of crime.

Some of the speakeasy’s young Jewish patrons have revived a sleepy synagogue next door that five years ago was about to close. Today, it has 300 members and is planning a $2 million upgrade to its worship center.

“The untold story of Detroit is young people,” says Mr. Orr. “The future’s going to change. It already has. I met with two dozen entrepreneurs, two of them veterans from the Afghan war. One’s a venture capitalist and one has a logistics company—and these are kids in their 20s who can go anywhere and are making it work.”

Not far outside of Detroit’s downtown business district is the emergent hipster colony of Corktown, where do-it-yourself, brew-your-own-beer types are fixing up cheap, rundown houses. The pioneers grow organic vegetables such as corn on nearby vacant lots. Corktown represents the frontier of civilization in Detroit.

Travel a couple of miles farther out, and the scenery begins to resemble the wild, wild West. There are no shopping centers or chain supermarkets. Sixty six thousand vacant lots and 78,000 abandoned or blighted buildings, including the old Packard factory, occupy 130 square miles of no man’s land. Yards are overtaken by knee-high weeds. A house with unbroken windows and shutters is a rarity.

These neighborhoods were deserted over the last 60 years by white, middle-class families leaving for the suburbs. The exodus accelerated after the 1967 race riot and during Mayor Coleman Young’s regime from 1974 to 1994—a regime that inflamed racial tensions in part by tagging white police officers as racists.

The likes of Al Sharpton and Jesse Jackson have continued to stir racial grievances here by leading protests against Gov. Rick Snyder’s appointment of an emergency manager, even though Mr. Orr is black. In Mr. Jackson’s words, the emergency manager would create a “plantocracy, or a plantation-ocracy.”

One of the reasons Atlanta is thriving, Mr. Orr notes, is because its black mayors like “Maynard Jackson and Andy Young decided to bury the hatchet of division” and instead “focus on rebuilding the city.”

Much of Detroit’s dysfunction is also due to simple complacency. “For a long time the city was dumb, lazy, happy and rich,” he explains. “Detroit has been the center of more change in the 20th century than I dare say virtually any other city, but that wealth allowed us to have a covenant [that held] if you had an eighth grade education, you’ll get 30 years of a good job and a pension and great health care, but you don’t have to worry about what’s going to come.”

But as it became increasingly clear this promise was unrealistic, “there needed to be some very nimble and agile thinking and leadership that was listened to,” he adds. “There was nimble and agile thinking and leadership that was spoken—but nobody listened.”

Due to a failure to adapt, “we lost our edge,” and not just to the U.S.’s global competitors, but to challengers in the South like Atlanta, Chattanooga and Dallas. Atlanta offers a nice foil to Detroit.

Fifty years ago, “What was Atlanta? Atlanta was a small city that had a bakery. . . . I used to drive through Atlanta in the ’70s when I was coming back from Michigan, ’76 through ’83, and Atlanta had peach tree hospital and the varsity drive-in restaurant.” Now Atlanta is among the 10 largest economies in the U.S. Adaptive political leadership in Atlanta encouraged entrepreneurship and development.

So how does Detroit revive its hinterlands, which seem to be so hopeless?

Mr. Orr’s strategy is to “put the key ingredients in place” and leave the city with a plan that will help “push out that development from the center of the city to neighborhoods.” He points to the “Detroit Future City” plan, crafted by public officials, community groups, businesses and philanthropists, which calls for focusing on blight remediation, lighting and public safety in six demonstration districts. The hope is that growth will radiate outward.

Other major cities, like Washington, D.C., and New York, that had fallen into disrepair were revived slowly by neighborhoods blossoming and expanding. The challenge will be to create the atmosphere and ingredients that can nurture this growth.

While Mr. Orr is optimistic, he acknowledges that there is “a risk element” attached to ceding control back to the city’s duly elected leaders whose corruption, neglect and mismanagement led Detroit into the abyss. This year’s council and mayoral elections in November could bring in fresh, capable and forward-looking leadership.

Mr. Orr won’t comment on the elections. Yet he does say that “there are some on the existing council who get it. They want a better city for themselves, for their children. The people of good faith is what I call them,” he adds. “The neighborhood revitalization is their job. If they take it up and do it right, then it will happen. ”

Detroit has been given a second chance, Mr. Orr says, that it can’t afford to waste. “The eyes of the world are on us. This is our opportunity for a great All-American city to show what it really is.”

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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