Orr, who has spent more than a decade as a bankruptcy attorney for the law firm Jones Day, served a key role in Chrysler’s 2009 bankruptcy, led Detroit through the biggest municipal bankruptcy in U.S. history, and has now been hired by WMATA to “advise the agency on ways to work through its financial challenges,” as reported by the Washington Business Journal.
In theory, when an entity like Detroit files for bankruptcy, the lion’s share of the “pain” should be felt by the city’s creditors. However, according to the The Wall Street Journal, 21,000 of Detroit’s retired city employees and its 9,000 current ones were the hardest hit.
Here’s what Orr did while in Detroit…
At the time, Orr severed his professional relationship with Jones Day so that he could accept the position in Detroit, but that didn’t stop him from awarding Jones Day a lucrative $57.9 million contract with the city, according to reports from the Detroit Free Press. Yes, Jones Day made nearly $60 million on Detroit’s bankruptcy led by Orr, its former employee.
Less than four months after beginning his position in Detroit, Orr recommended Detroit's Chapter 9 bankruptcy filing, which was authorized by the governor. Orr then lead the city’s restructuring process through the end of 2014.
Facing an estimated $18 billion in debt, Orr led a fairly swift bankruptcy process that shaved $7 billion off of the city’s $18 billion in debt. While leading this effort, Mlive.com reporter Susan J. Demas reported that Orr was enjoying crab cakes and calamari on taxpayers' dime in a penthouse hotel suite.
Orr also made a $275,000 annual salary and brought on former Detroit City Councilman Gary Brown to handle day-to-day city operations (while the city still had a mayor on payroll) and a new police chief, to each take home $225,000 a year. Once Orr completed the bankruptcy proceedings for Detroit, he returned to Jones Day in its Washington D.C. offices.
What Bankruptcy Did to Detroit City Workers…
While Orr and his colleagues were raking in healthy six-figure salaries, Detroit’s unions were in negotiations to help pull the city out of its financial troubles without having to file for bankruptcy. Upon Orr’s arrival in March 2013, AFSCME Council 25 (the largest of Detroit’s public unions) signaled their willingness to impose deep wage and benefit concessions on the city’s 3,000 AFSCME-represented members, but they asked that bondholders be forced to take some losses, as well, in order to give the appearance of equal sacrifice. Those efforts were snubbed.
Once Orr imposed his cuts on workers, Bloomberg reported that pension checks for the city’s retirees had been shrunk by 4.5 percent and the future cost-of-living raises for 12,000 Detroit retirees, beginning in March of 2014, had been eliminated.
In addition to absorbing pension cuts, almost 11,000 retirees and current employees have to now repay an estimated $212 million in excess interest they accrued in a city-run savings plan, which was separate from the pension fund. Bloomberg reported the annuity plan guaranteed a 7.9 percent annual return even when the pension lost money, and employees also received bonus interest in some years. All that will now have to be repaid.
Henry Gaffney, a retired bus driver and former President of ATU Local 26, told Bloomberg that he’ll pay back $56,000 of the $300,000 he saved by deducting $428 from his monthly $3,100 pension check for 19 years. He said he also pays $375 more for health insurance each month now.
What Will Kevyn Orr Do at WMATA?
Sources have told the Washington Post that Orr will serve as a “part-time strategic executive adviser” to the new General Manager Paul Wiedefeld. In addition, Metro is now under a $1.74 million contract with Jones Day.
A Metro official who spoke with the Washington Post anonymously said, “We’ll have discussions with the jurisdictions. We might have discussions with the unions, either in the context of contracts or in the area of pensions and other benefits. There’s a potential for a lot of engagement on reducing our expenses.”
With hints like those floating, now is the time for Local 689 and the other unions that represent workers in Metro to stand firm for their members, their benefits, and a stronger transit system. WMATA’s financial mismanagement must be addressed, but the unfortunate truth is that with Orr at the steering wheel, bankruptcy and a significant loss to worker pay and benefits is always on the table.
Upon Orr’s arrival in Detroit, many asked, “Why hire a bankruptcy attorney unless you are filing for bankruptcy?” That question was valid for Detroit then, and it is valid for Metro now. Fortunately for Metro workers, Orr won’t have the unilateral control he had in Detroit. At least not yet.