Detroit’s cash flow positive, but situation ‘dire’

10/17/2013

DETROIT — Detroit ended September with a positive cash flow, largely because it defaulted on many of its financial obligations while still collecting property taxes, according to a report Wednesday by the bankrupt city’s emergency manager.

In his report to the state treasurer’s office, Kevyn Orr said the city had an unrestricted cash balance of about $128 million for the quarter ending Sept. 30.

The bounty mostly was driven by the collection of more than $237 million in summer property taxes, he said.

Mr. Orr defaulted on $2.5 billion of the city’s unsecured debt in June, around the time he asked creditors to take pennies on the dollar for debt owed them.

An interest-only payment of about $4.3 million was made Oct. 1 on $479 million in secured general obligation bonds as Mr. Orr seeks to take the city into the largest municipal bankruptcy in U.S. history.

He said the city still paid retiree health care benefits but did not make any contributions to Detroit’s General Retirement System or Police and Fire Retirement System pension funds.

“The financial condition of the city of Detroit continues to be dire,” he wrote in the report.

He filed Detroit’s bankruptcy petition on July 18. The city has at least $18 billion in obligations and can’t meet them all.

A trial on Detroit’s eligibility for bankruptcy is scheduled to begin next Wednesday in U.S. District Court in Detroit.

Mr. Orr hopes to complete an adjustment of Detroit’s debt through bankruptcy no later than next September, according to the report.

Meanwhile, Mayor Dave Bing publicly criticized Mr. Orr for how the turnaround specialist is attempting to restructure the city.