BRIAN LAMB: Kevyn Orr, from March 14th, 2013 until December the 10th, 2014, you served as emergency manager of Detroit, Michigan.
KEVYN ORR: Yes.
LAMB: Why did you take this job?
ORR: That's a good question, Brian. I've been asked that a lot of times. I was restructuring professional and still am. And Detroit is a city that's 83 percent African-American. It's a city that had gone through several decades of decline which have been well chronicalized. It was a city that needed some restructuring. I initially was a little reluctant to take the job. I thought it'd be difficult and I was very comfortable sort of in my corporate attorney life, my family and I.
And both my managing partner, (Steve Brogan) and my wife said look, this could be a call to action. It's important. It is outside of your comfort zone. But, you know, we have people who make the ultimate sacrifice on behalf of their country.
This is a temporary billet and, oh, by the way, you'll still be in an air conditioned office in the summer and we're heated in the winter, we're not asking to make that kind of sacrifice, but sometimes you do have to give back and after some reflection it just seemed like the right thing to do, so that's why I did it.
LAMB: You're based in Washington, but you are a graduate of the University of Michigan, Law School, does that have anything to do with why they asked you?
ORR: Yes, I think it did. I mean, I was an undergraduate in University of Michigan, in Law School, University of Michigan. So, from '76 to '83, I lived in the State of Michigan. I went to school there. The class - they years of the '80s were pretty good years. I mean I think class of '81 is (Valerie Jarrett), class of '82 is Governor Rick Snyder, class of '83 is me, the mayor, Mayor Mike Duggan and (Stacy Fox) was my deputy. She's now general counsel of DuPont.
So we all sort of came up in that era. But I think having a connection to the city and sort of understanding what it was in its heyday as well as having participated in some of the other cases, the Chrysler case and whatnot in the city perhaps made me seem like a more logical collection than maybe someone else.
LAMB: WXYZ TV, channel seven in Detroit covered you a lot and we're going to go back to one of the first times in March of 2013 and get a sense of what they were saying then before you took the job.
ORR: Sure, sure.
(BEGIN VIDEO CLIP)
UNIDENTIFIED PARTICIPANT: An historic day but not the kind of history a city or its people really want to make after all. Just two weeks ago, Governor Snyder declared Detroit in a financial emergency and they are some staggering numbers. Let's take a look at those. Cash deficit of $100 million plus, that comes up June 30th. Here's an even bigger number, $15 billion in long term debt, by the way, 1.5 billion of that due over the next five years.
The governor says he has taken the next step to getting Detroit's finances under control. Summit Action News reported (Jim Kurtsner) was in the room with the governor when he made that announcement. He joins me now.
(Jim), first question is related to Kevyn Orr in the EM, do we know if this process continues, might when his first day would be.
JIM KURTSNER (ph): JIM KURTSNER (ph): Yes, they just touched on their live interview. They have to do all the paperwork. His start date will be a week from Monday, March 25th.
(END VIDEO CLIP)
LAMB: So what did you feel like at that point?
ORR: Well, you know, it's interesting, Brian. Back at that point, you know, I perhaps had underestimated the amount of attention that the case was going to get. I'd participated in other high profile matters when I was in federal government, the RTC. I was primarily responsible for supervising the so-called Whitewater investigation, Madison Guarantee savings and loan.
Three years earlier than this we had just completed the Chrysler case, some other significant matters. So, I'd been involved in some pretty significant things. I thought, well, this another job, there will be a little bit of attention paid to it early on and then, will by.
And so (Jeff Von) and (Jim Chrysner) who I now know of - I didn't really appreciate how much on the local scene this have been coming this way. That week of that report (Marychael Patrick) was sentenced to 28 years in prison.
So the city had been going through a long period of trauma and anxiety about the state of affairs. If you drove through the city it didn't look like a major American city should. There was certainly a long history of reviews. The Governor, Governor Rick Snyder has spent a lot of time, two years, reviewing the status of Detroit and pushing out reports on that including his findings of fact, 22 pages of findings of fact on March 1st, 2013.
So that period was sort of - the first period where I began to get an inkling of how significant this might be and how much all of that sort of due diligence and academic work had really played itself into the body politic as expressed by the press corps.
And I think I begin to realize, wow, this might be a little bit more significant than I thought it would be.
LAMB: What was the first thing that you notice was really a mess when you got there?
ORR: You know, the city was operating. Mayor Bing had come in to restore some sense of dignity and confidence to the city and he did that. And he actually had made some progress. He'd asked the workers to give back 10 percent, particularly public safety work because that's important in Detroit. We had 9,000 active city workers but 6,000 were on the civil side, outside of the enterprise funds.
And of that 6,000, 4,000 public safety. You know, he had 2,700 or so as police, 1,100 as fireman, 400 EMTs and another 400 or so at the 36th District Court, our criminal justice administrator.
So when you look at the budget, two-thirds of it is public safety budget. So the first thing I really - and we met with the public safety unions was for several reasons, one, some of our initial metrics, 58-minute response times for police is now down to 12, but that was back then.
Weren't - weren't good metrics for a city, any city, but let alone a city like Detroit. So our initial view was, hey, we've got to focus on the basics. Let's get government running as it should. Let's deal with public safety. Let's focus on service delivery to citizens.
The other stuff that had happened in the past, we weren't going to spend any time looking at that kind of stuff. We didn't have time. My term was 18 months and that clock started ticking from day one. So we really had to get focused - my team and I had to get focused on moving fairly quickly.
LAMB: And you left the Jones Day Law Firm to do this?
ORR: Yes, I resigned from the firm, totally separated from the firm and worked exclusively as the emergency manager for the City of Detroit.
LAMB: And you're back to the firm now?
ORR: I'm back to the firm now, yes.
LAMB: Here's a stumble.
ORR: Right, right.
LAMB: In the eyes of some people, August of 2013, back to WXYZ which weâ€¦
ORR: I know you'll get into this, yes, yes.
LAMB: Yes, let's watch this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED PARTICIPANT: These are some comments the emergency manager may be regretting. They may dog him for the next year, year and a half but he's still going to be the emergency manager in Detroit. Take a look at specifically what he said to the Wall Street Journal that was published this weekend. Kevyn Orr is saying for a long time, the city, Detroit, was dumb, lazy, happy and rich.
He goes on to say that anyone with an eighth grade education, you get 30 years of a good job and a pension and great healthcare but you don't have to worry about what's going to come. That's clearly a reference to Detroit going through bankruptcy, some 20,000 Detroit city workers were facing cuts in their pension and healthcare.
(END VIDEO CLIP)
LAMB: Well, why did you make those comments and you still stand by them?
ORR: Well, one, I do stand by him, but let me give you the context. My public affairs director Bill Maling and I were having an interview with Wall Street Journal and we were talking about the city back in the 1920s and 1930s and we were saying, yes, when the city was rich and we were buying art on the arm. I mean we'd have commissions and buy it outright. The city was the dumb, lazy, happy and rich, I think was the comment.
Just an offhand comment. In fact, I recall that Senator Cory Booker used those very phrase, his dad had told him that, like three times the week after that very closely. I had no idea that anyone was ever going to make that connection to the contemporary city at that time because the dumb, lazy and rich, we weren't rich.
So clearly, I was talking about the city at that time. And when I say eighth grade education, that was a reference actually in my mind to both of my grandmothers had eighth educations. They went into service after eighth grade in the south is what you did.
So it didn't even dawn on me that that had any connection with what we were doing at that time. But, boy, let me tell you, the city exploded for about, the commentators that is, for about a week and a half whether he's insulting us, he's like - and finally, I think I went to one of the ed boards, I said, look, you can scour my professional behavior and background for the past 30 years, even in the most heated time with the most vociferous opponents, you will never heard me use that kind of language about anyone let alone a city that I am obligated to represent and stand by.
So I appreciate that people may have taken some umbrage with it because they thought I was referring to the city at that time, that's not - that was not my intent, but I will apologize for it. I don't - I don't insult people. I've never done that and I don't anybody even - some people I've been in pretty heated events with would ever say that's my character, that's how I behave.
But I will apologize for it because frankly we need to move behind what were some unguarded and offhand comments that I made to a reporter. And there's a whole dynamic between the Wall Street Journal versus the sort of working city and all that kind of stuff.
But we need to move behind that because I'd had just a little bit over a year at that time to get done with this and it's important that we get to the work at hand and I'm happy to say that once I did that, cooler heads prevailed, a lot of the other commentators came in and said, look, we understand what he meant, that's not what he's meant, let's go forward.
LAMB: Back in July of 2013, Rachel Maddow talked about the difficulty of - that happened in the state at that time about even getting an emergency manager there.
ORR: Yes, yes.
LAMB: Let's watch a little bit of what she said and explain this.
(BEGIN VIDEO CLIP)
RACHEL MADDOW: Michigan just voted to repeal the radical emergency manager law, but because the Republicans still held the majorities in the legislature, five weeks after the election, the Republicans passed a replacement bill to the one that just got repealed by the voters. Only this time, they passed it in a way that could not be repealed the way the old law was.
And now, 14 weeks after that Republicans in Michigan are going for it, they're going for the big one. Today, at 2:00 pm Republican Governor Rick Snyder of Michigan announced that he would use the take over law, the one that got repealed and they reinstated, yes, he would use that takeover law to overrule the voting rights of the population of the largest city in Michigan.
With this takeover and considering all the other things they've taken over under this law this will put roughly half the black population of Michigan under the direct control of Governor Rick Snyder of Michigan. If you are an African-American and you live in Michigan, the chances are one in two that you are allowed to vote for your own local elected officials.
(END VIDEO CLIP)
LAMB: So your reaction to that controversy and what happened?
ORR: Well, there are three things. Yes, the law was repealed, but that was public act, I think it was public act four. So I came in under 72, public act 72, which already existed. And then, 436 took effect. I think I operated for two days under republic act 72 and then, 436, republic act 436 took effect on the 28th I think it was. But that was a process under the Michigan constitution that was entitled to be taken up.
The elections have consequences, one of them that you have a joint legislature, Republicans in the house, Republicans in the senate and Republican governor and they did what was Constitutional permissible.
The other thing is the second layer is there was a lot of chatter about voting rights and this is suspension of voting rights and that's not true. We had two elections during the course when I was the emergency manager, both for the mayor, Mayor Mike Duggan who actually won on a write in ballot having been disqualified. He got more votes than he originally was counted once it got to the state and a mayor for governor and Governor Snyder was reelected with more votes out of Detroit than he had the first time around. So, voting rights were preserved.
Number three is and I've said this many a time, if you come - had come to the city at that time and had looked around, certainly most reasonable people would have come away with a feeling that a receivership, which is what I was, was an appropriate mechanism not so much to suspend the right of voters, but to address 60 years of neglect. There were homes in the city that had 20-year-old trees growing through their roofs.
You know, some of our police cars didn't have bumpers on them. Our police and our EMTs, our ambulances would be out of the city on calls by 7:30. I had a meeting with one of the EMT presidents, union president and he was late to the meeting. He was late because in city hall that day, this is in the fall of 2013, a woman had a seizure downstairs, but there were no ambulances available to render aid in.
He had to stop and help her with her seizure because we had been on call since 7:30 and they were being run into the ground. So I think any reasonable person would set a receivership which has happened since the 1637 tulip bulb crisis in Holland. Receiverships in old English law have been going on for a couple of hundred years. I think this had been worthy.
LAMB: I read that 600 different municipalities in this country have gone through bankruptcy, but this is by far the largest ever?
ORR: Yes, yes, this was - this was a different order of magnitude, just - you know, the start was $15 billion of debt when we first came in, we soon discovered it was $18 billion in long term debt all in. And the ironic thing about this is of the 10 billion that was secured we paid that, we agreed to pay our secured debt. So, we honored their priority scheme as entitled to under federal law. But for the 8 billion that was unsecured, 5.7 billion of that was retiree healthcare obligations.
That is, obligations to retirees which the city had not saved a dime and that was coming out of the current general fund budget year after year. According to the trend lines, if that continued by, the year 2017 to 2023 72 percent of the cities budget would be dedicated to legacy cost, debt service and healthcare principally.
And that means 720 out of a billion dollar general fund budget would be dealing with backward facing obligations. There'd be no money, you can't cut enough of the budget to run a city on $230 million. It just wouldn't happen. The city would have to contract. $3.5 billion, that was unfunded pension obligations.
Now, the certificates of participation, the cops, the 1.5 billion that was due that year, that was engineered in 2005 and 2006 supposedly as a solution to pension underfunding and that was going to cure it for all time and it didn't. What it did was accept the city pack with almost $2 billion of debt it couldn't cannot afford. Only 500 billion or so of it was unfunded, unsecured pension obligations.
So, it was quite severe in terms of the debt service and I remember doing the math one time, and I came out with a figure that if you took all of city's discretionary income, that is for any 4th of July celebration, for any city parks, for any conference, symposium, took all that income and you dedicated it to payoff the unsecured debt, $90 billion, it would be 60 years if the city did nothing else.
You clearly couldn't do it. So we recognize some of the sentiments expressed by people that this was suspension of democracy and it was unfair. Certainly, I personally received some invective of some. I believe one of the statements in court was that Governor Snyder was the plantation master and I was his Uncle Tom overseer.
So there's a lot of verbiage like that but we've tried to just work through that and focus on the problems at hand. And I think over time people generally started to see the effort as one of an honest broker, and some of that noise started to die down a little bit.
LAMB: Coleman Young was the mayor of the city, first black mayor of Detroit I believe.
ORR: Right, right.
LAMB: For five terms.
ORR: I'm sorry. My goodness. I usually - I'm usually on top of this. OK. Sorry, bro.
LAMB: It's OK. But for five terms.
LAMB: What impact did he have on the city and when he left office what kind of shape was Detroit in?
ORR: Coleman Young, there are studies, in fact, one of our local newspapers, the Detroit, Free Press, did a study. Coleman Young was actually a pretty good mayor. He left the city in pretty good financial condition. There was a lot of concern that he had focused on building the city downtown structure, sometimes perceived to be at the expense of the neighborhoods.
But the reality is he came onboard. He took on some police practices which perceived - which were perceived to be oppressive. He took on the fire department, which for a long time had a sort of lack of diversity in their hiring practices shall we say.
So Coleman Young was actually a pretty good mayor. When he came in, when you look back on it, there's some tumultuous times. Likewise, (Dennis Archer) was actually a pretty good mayor. The irony is that Coleman Young and Dennis Archer left the city in fair condition. It is the years really 2000 to 2010 and in particular the great recession years of 2006 to 2009 that a lot of the mischief started to occur sort of at exactly the wrong time.
And that exacerbated sort of the trend - demographic trend lines of the people living the city, 250,000 between 2000 and 2010, the city went from 200 - roughly 1.2 million to about 800,000 and then, that continued to decline demographically, but when you have the mischief and (inaudible) allocation of the Mayor Kilpatrick's administration that exacerbated as one city council person told me. You know, the white middle class began leaving with the great busing crisis of the '80s, '90s, 2000. The black middle class left in the millennium and that sort of drove the city down a little bit.
LAMB: Is it true that 40 percent of the street lights didn't work when you got there?
ORR: Yes, yes, that's absolutely true. We immediately - we - when we first came in, meaning in March, we recognized that much of the work that had been going on with the city with the Detroit review commissions which were supervised by the governor's office and some our advisers, Ernst & Young and Miller Canfield, had already developed a wealth of knowledge about the status of the city.
And we pulled that together in what we called the June 14th, 2013 proposal for creditors. Forty percent of the street lights were down, 58 percent police response time. $600 million in deferred pension payments at an eight percent interest rate, (inaudible) $18 billion in debt.
I mean if I you look at the document it sort of as a compendium of all the (evils) that have affected the city. And we did that so people would get a true snapshot of what the city was like. And to this day nobody has taken the issue of what we said.
LAMB: Let me ask you thought, what's the difference between Detroit being $18 billion in debt and the United States having debt of $18 trillion?
ORR: Right. I mean, you know, you look in some of the overseas things. You look at GDP over debt service, GDP $16 trillion, debt estimated to be $18 trillion, so it's roughly one to one and that's not - believe it or not, that's not a bad thing. It's a lot of money, it's certainly in our lifetime. I remember when the GDP was somewhere in the neighborhood of single digit trillions, you know, six trillion, seven trillion, it's a lot of money.
But is it manageable with some management? Yes. Because if you think of it this way, if Detroit had taken that $1.5 billion that it borrowed in 2005 and 2006 when the stock market went down to 6,700 and if it had just invested in an index fund, Dow Jones Industrial Index, Standard & Poor's, whatever.
Stock market is now trading at 18,000, almost three times what it was. They not only would have tripled their money, they could have paid the pensions in full and then gotten back in the business of declaring what's called the 13th check. It used to be a practice of giving pensioners a 13th check at the end of the year in addition to the 12 that are due.
So it could have fixed itself if there had been some sort of sober management going forward just like any organization in the United States as well. If you have some strong leadership and some focused leadership, you can resolve these problems, but it takes a lot of effort.
LAMB: Back in September of 2013, we were just talking about Coleman Young.
ORR: All right.
LAMB: Here is Coleman Young II talking about you.
ORR: Yes, yes, yes.
(BEGIN VIDEO CLIP)
COLEMAN YOUNG II: Let me just say the people in Lansing think they got you beat. They sit up there rubbing their hands together. They sit there licking their chops. But they don't know who we are. They don't know what Detroit is. They don't know that Detroit is the home of Rosa Parks, a woman who sat down so a movement could stand up.
The City of Detroit is the place where Dr. Martin Luther King first gave his I Have a Dream Speech right here in this city. The City of Detroit is the place where the first radio broadcast, the first road was built. We put the world on wheels. We made a soundtrack for a generation with Motown, right here in this city. This is the City of Detroit where the Battle of the Overpass took place, where the $5 work day took place, where we let slaves from the south off the plantation to the north to their liberation right here in the City of Detroit.
And after all that you think we're going to be beat by some governor? Do you think we'd get beat by a man who thinks we're dumb and lazy? No, no, no, Mr. Kevyn Orr, the people of the City of Detroit aren't dumb and lazy, they're overworked and underpaid.
(END VIDEO CLIP)
LAMB: Do you remember that?
ORR: I do remember that. It's quite voluble.
LAMB: What was he doing there though? I mean what difference does it make that Rosa Parks was there or that Martin Luther King gave his speech there?
ORR: Well, everything he said is true. Rosa Parks did move to the City of Detroit after receiving death threats in the south and she was chosen by the NAACP over some other candidates specifically because she was trained and she had the right presentation. And I want to be very clear about this. I honor and respect my forefathers including my own grandparents and my own father who struggled so I could be here today.
So, I just want to make sure everybody understands, I'm well aware of the long and trajectory in history from 1640 when (John Punch) was an indentured servant that was sentenced for running away to a lifetime of servitude while his two other runaways, two white men, one was a Dutchman and one was a Scotch Irish got an additional four terms. All three of them got 30 lashes but he got sentenced to life in Virginia.
They think he's related to (Ralph Bunch), the first black winner of the Nobel peace prize. So, I'm well aware of my history and legacy. I understand the volubility of Congressman Young and some of the emotion that occurred at that time of being afraid that there was going to be a takeover.
What I'd like to think is that after they see the results and going forward now in Detroit they appear to be quite well. In fact, the city is going above the projections we have pointed out, that some of that shall we say anxiety that was expressed and invective that was directed personally perhaps in reflection wasn't so well-taken.
LAMB: How did a white man get elected mayor of Detroit with 82 percent black population?
ORR: You know what, people sat down, I know both Mayor Duggan and his opponent and I think of them as friends. And as I said, I went to law school with Mayor Duggan. Mayor Duggan was originally - moved in to the city to run for the office of the mayor. He got his papers in a day late and so, his opponents moved to get him disqualified from the ballot and he was.
The thought at that point was that he was really, you know, not going to run and that would mean typically in a city that votes consistently Democratic his opponent was going to win. Cooler heads prevailed and they importuned him, asked him to continue to run, have a write in. During the write-in campaign some say, there's no proof, but some say some members of the opposition went out and got a gentleman by the name of Mike Dugeon, D-U-G-E-O-N.
Mike apparently was a young guy, I think in his 30s, hadn't really been involved in politics before, but the cynical expectation was that majority voters of Detroit would not recognize the difference between Mike Duggan, D-U-G-G-A-N and Mike Dugeon, D-U-G-E-O-N. They did. They wrote in Mike Duggan, the white guy, and then, his opponent's crew decided they were going to try to get him disqualified on the ballot count because it was a write-in ballot.
They sent it to the state, state did a recount, they found out that Mike Duggan won more votes than the original count, which really is an expression and that's why I was saying there was democracy in the city. Not only was there voting rights. There was voting rights at a very high level, a write-in campaign for the first white mayor perhaps in over 35 years of coming to that city because I think the people of Detroit and this is really a testament to the people of Detroit, put aside race, despite what some people thought and thought who is the best guy with the best track record.
Mike had been an CEO of DMC, Detroit Medical Center and had built that up. Who has the best record and best probability for running the city? We think it's that guy. We don't really care what his race is. We think that's the best candidate and that's what they voted for, and that's how he became mayor.
LAMB: When was that election?
ORR: That election was in the fall of 2013 in the heat of things you might say.
LAMB: Big event in Detroit. I'm not so sure how old you were at the time, 1967, Clarence was saying when he was here in 2011, American University professor talked about his involvement in this. Let's watch this, fill in the blanks for us.
(BEGIN VIDEO CLIP)
UNIDENTIFIED PARTICIPANT: I remember vividly the 1967 riot in part began a few blocks from my house and my mother, my father and I and my sister, we'd been in Canada. It started on a Saturday night and we had spent all day, Saturday in Canada, often people in Detroit cross the bridge and go fishing.
And when we got back there was a full blown riot going on and it was a very, very hot evening. I was probably about 12 or so then. And nobody was inside, and at one point, my mother and my sister and I walked down a couple of blocks to this sort of main intersection where there were just hundreds and hundreds and hundreds of people.
And after being there for awhile a car drove up and two white men get out and fired at the corner, they lifted their shot gun and fired. And everyone on the corner was hit, it was probably about 20 people. Everybody was hit except for me. My mother was shot, my sister was shot.
(END VIDEO CLIP)
LAMB: 43 people killed, over 400 injured, what impact did that have on the condition that you found Detroit in when you went out there?
ORR: Well, two things, the issue of racial division, some would say it was pioneered in Detroit. If you go back and look at official government policy, for instance, federal home loan bank board and then - and for that non-governmental, the national board of realtors, specifically the concept for instance of red-lining was pioneered in Detroit.
If a black person bought a house in a previously white neighborhood there was a red line drawn around that neighborhood and the federal home loan bank would no longer buy conforming loans from that community.
So it chroniclized, I think there's a study that shows the greatest transfers of wealth from the federal government has been with home mortgages to principally - disproportionately white homeowners because of those practices.
American board of realtors if you sold a home or represented black buyer when you get there, this issue, I was nine years old by the way in '67. This issue is chronicalized in Thomas Sugrue's book, The Origins of the Urban Crisis, Race and Inequality in Detroit which goes through in stark detail, how none of these is by happenstance, it's quite consistent and was virulent.
In fact, in the (40s Aussie and suite) a pharmacist who bought a house in the west side in a previous white district had to defend this house and his family at gunpoint from his white neighbors who wanted to burn him out.
So that concept of the division in Detroit had been going for a long, long time in the community. So when I saw this, one, I was well aware of that legacy, the neighborhoods, eight mile, which is the dividing line between urban Detroit and suburban greater southeast Michigan is a stark contrast, literally 30 feet of asphalt.
You go across the other side in Southville or Dearborn, same houses, same size lots, same era of construction, totally different vision, totally different vision. And a lot of that over time had been designed to be that way as a buffer. The way it had expressed itself to me when I came into the city was number one, having lived through the '60, '63 riots, '65. '67, '68, '69, having lived through Watergate, having lived through a very tumultuous era was, I did not want that to be the face of the City of Detroit.
And there were certainly detractors in the city who were trying to drive that narrative, they were there, trying - we're gong to burn it down, we need to riot. In fact, later in the year after Ferguson occurred, there were folks who were saying we're going to Ferguson these MFs, that kind of thing.
Because I knew that the news media that was there, not mainstream American but there were foreign media that were there were looking for that narrative. And so I actually sat down with each of the city council people when I first came in and said, look, I recognize this is a difficult time.
One of the first things I'm going to do is to delegate authority in normal course back to the city council and mayor, so there is oversight in governance and delegate back much to the chagrin of some people in the city your salaries and benefits because I think you should be running the city. I don't think, we should be working in partnership, but let's do this, I'm a sin eater.
I'm here to take care of all sins before I got here. I don't care what you say about me, that's fine. I got a pretty tough skin. But let's not destroy the city that we love. Let's not give the press both national and international that narrative, let's at least conduct ourselves in a dignified and honorable way, even though we may disagree, so that at the end of this process we're not sure where we're going to end up but at the end of this process we can always look back and say with pride, we behaved in a way that was admirable and we did not devolve into some of the behavior we've seen all too often in some other communities.
And I'm very proud to say and I say this wherever I go, I'm very proud of the elected officials and the residents of the city of Detroit that they did not take that bait, we did not have another 67 riots, we did not set the city back both politically because that would have been a bad look but also substantively, we could not drive the kind of reinvestment, the kind of interest, the kind of positive attitude we're now seeing in the city if that had been part of the narrative.
LAMB: When you went there first and this job that you're in, how many empty dwellings were there?
ORR: Twenty percent of our housing stock these are just -- there are just residential dwellings, 72 I think out of 320 or so where vacant or blighted.
LAMB: Seventy two thousand.
ORR: Seventy two thousand. Yeah. I'm sorry, it's 72,000 were vacant or blighted. Let me -- so the real problem to that isn't just cosmetic, how the city looks or economic that those houses aren't paying real estate taxes. The real problem is that 60 percent of our firemen calls, health and safety are related to blighted, abandoned, or other structures.
So, we're running our firemen to fires that are totally unnecessary in uninhabited dwellings and incurring the cost of doing that, so it's all three of those things. Not on the tax roll. They're not in fact providing value in terms of the accretion of value for homeownership and operationally they're running our operations down by requiring a disproportionate level of emergency services. So, we had to try to look at the blight.
LAMB: In 2009 you're talking about foreign media, Al Jazeera which is a Qatar...
ORR: Uh-hmm. Yeah.
LAMB: Network -- based network, at the time Al Jazeera America wasn't created, it's Al Jazeera English, let's watch what they were showing their audience about it.
(BEGIN VIDEO CLIP)
UNIDENTIFIED PARTICIPANT: The U.S. recession has hit Detroit so badly that thousands of houses are being left to rot as residents default on their mortgages, are forced from their homes and moved away.
But once that house goes vacant the aluminum disappears, the copper disappears, the sidings all gone, the gutters are gone, they might be a little bigger, a little bit smaller, a little newer but there's thousands and thousands of these.
A local state agent explains that banks won't pay to fix up houses, so they're being shoved back into a dead market at astonishingly low prices.
It's at that point really.
Well, on this particular block over 50, 60 percent of the houses are either missing or are already in foreclosure and this particular house is at $50 right now. We're starting to see a lot of houses fall well below a thousand dollars.
(END VIDEO CLIP)
LAMB: Who owns all those houses and are they still empty?
ORR: Well, we did several things with regards to houses. First of all, we created an authority, Detroit Land Bank Authority and houses that have been taken back in tax foreclosures from the city, we put those into the authority, over 40,000 for the city alone almost still owned by private owners but those are defunct.
Secondly, at the leadership of Detroit Blight Task Force headed by Dan Gilbert, one of the city patrons. We chronicalized with technology each house in the city of Detroit and graded it by its condition, so all 320,000-plus dwellings have been put into a catalog of housing status, so we can begin to make determinations about which should be -- blighted homes should be demolished and which can be rehabilitated.
Mayor Duggan's team came in and we agreed, they should have the opportunity to create an incubator on the west side Detroit Marygrove area where they're going in section by section in the city. And the city is huge, it's 139 miles square, you can fit the city the size of Boston, Manhattan and San Francisco in the city's borders, so it's a very large piece of land. It's going by and trying to rehabilitate those homes in areas that deserved rehabilitating, get buyers back in. Fourth, on the website of Detroit, there actually is the ability going and bid on homes, the condition is that you -- several conditions, but some of the principles are you have to come inhabit and rehab it within six months, close on it, put it back on the tax roll so we get those homes back performing but also grow the city.
So, certainly in 2009 that was a representation but two things have happened since then, just Tuesday, it was reported that home sales are up by three point nine percent in the area. Home prices in Detroit are up double digits, I believe almost 30 percent, and we're finally getting our hands on remediating all of the blighted structures of the city which is one of the components of our plans, that we get to blight, lighting, public safety and financial integrity. So, those things are well on the way and I'm happy to report that we're actually achieving above the goal of the city is achieving beyond the goals that we originally set when we left in December.
LAMB: Now, do you have any relationship to them now at all?
ORR: I do not. I'm a private citizen. I am registered to bid on houses on the website though, so I might be able to do that.
LAMB: Now, why would you do that?
ORR: I think it's a great opportunity. I look at, you know, my -- I've been fortunate with my career to have worked in a few other cities and when I left Michigan, University of Michigan Law School in '83 I went to Miami.
Miami was aflame and you remember, Brian, trouble in paradise. Paradise lost between drug dealers, banks being Laundromats and race riots, I mean, '81, '82 , '83 started with the '81 killing of Arthur McDuffee, a black motorcyclist that was beaten to death by six officers, he died several days later, and each summer those areas would burn.
All my friends saying, why are you going to Miami, my god the place is aflame. I said because there's opportunity, it's at its nadir, it will get back to a zenith and since that time, some of the areas that were blighted now South Beach was principally either retirement homes or beat down, off the charts, you can't get it, I left there and came here to Washington D.C. and '91 the seventh and ninth street corridors were still burned out from the 68 race riots here in this town.
Mr. Powlan built a stadium in the middle of 7th Street and look at what that's done, U Street, Shaw, Cardozo, Florida Avenue are growing off the chart, you can't get into them. Detroit has that same sort of feel that it's now in its ascendancy. So, the value proposition is high, the opportunity cost is low and the trend lines that we were looking for are actually better than we expected just six to seven months out. So, I think it's a great opportunity. That's just -- that's my own view, everybody has to make their own personal decisions but that's what I see.
LAMB: Life started in Fort Lauderdale, Florida?
ORR: Yeah. That -- yeah.
LAMB: What was your dad and what were your dad and mom doing?
ORR: My dad and mom were both teachers, they came back, the irony of all this discussion is my dad was in the army and had my older brother in 1955 in Heidelberg, Germany in the integrated officer's ward. They came back in Fort Lauderdale, Florida in 1958 and showed up at Broward General Hospital and they were turned away because it was still segregated.
So, I was born in the segregation in the United States in West Broward Clinic across the Seaboard Coastline Railroad trucks with a midwife. So, my brother was born in an integrated hospital in Germany and I was born in the segregated clinic in Fort Lauderdale, Florida.
They eventually went on. She became a school administrator and she was interim chief, interim school superintendent for the fifth largest district Broward County Schools. My dad was an AME minister. My great granddaddy, my granddaddy and my daddy are all AME ministers, I'm fallen, I'm just an attorney.
Why did you not go that route?
I actually thought I would at that point. Ninth grade I used to -- I mean when I was nine years old I used to teach Sunday school and I thought I was going to become a seminarian when I was in high school, but started getting an interest in the law, to be quite honest with you Brian, as a young black kid driving around Fort Lauderdale, Broward County was divided by race and class, by two railroad tracks. FEC Foreign East Coast railroad track, Seaboard Coastline and the Dixie railroad tracks.
And the white folks who were rich lived on the beach and then there was the FEC railroad and then the working class white folks lived there and then there was the Dixie tracks and that's where black folks lived. And I have friends, went to a school I had friends of all stripes and colors, so I'd go visit my friends on the beach and got to the point that the cops would just follow me. I could tell them they're following during their triangulations and parallels when they want to stop and just low grade hassle, just hassle me for no reason.
And so finally by senior high school, I said, you know I think I want to be an attorney, I want to be a civil rights attorney. I want to know law and I want to stop this, I want to defend this. And so I decided, you know, I'm not going into the seminary, I want to go into practicing of law. I got in law school and started hearing about this corporate stuff and that sort of caught my eye and the rest is history.
LAMB: And you did go I mean, you've done a lot of jobs. Detail the jobs that you've had with the -- even with the government.
ORR: Yes. I started out in private practice in Florida with the -- with a Florida firm. Left what I thought was going to a two year leave of absence in government, went into the FDIC and then the savings and loan crisis hit, this is in '91 and went over to RTC later that year in '91.
LAMB: What was a -- what's RTC?
ORR: Oh, RTC at that time was the Resolution Trust Corporation and tried to resolve all the savings and loans crisis at that time and a little bit of controversy but got it done.
LAMB: What was attracting you to that though at the time?
ORR: Remember there was the first Persian Gulf War and I wanted to serve my country. I wasn't militarily inclined. I always want to do some federal service because I had some nascent political aspirations, that part of my life, so let me go to Washington and see how this thing works.
And I'm just going to go for two years, I remember telling Gene Sterns of Sterns Weaver and Miller was my mentor and senior partner. I'm just going to go for two years, he said, "Kevin if you go to watch you'll never come back" he said, "You'll get Potomac fever, " I said no, not me Gene.
So, I came and got involved in some representations there and then one of the people I'd worked with, Judge Jerry Patchin over at RTC went over to DOJ and asked me to come over to be his deputy, here again, two years, I came over Department of Justice and in 2001 change of administrations I joined my law firm, Jones Day. So, three federal agencies, three law firms.
LAMB: Wife's a doctor?
ORR: Wife's a doctor.
LAMB: What kind?
ORR: She's a perinatologist, high risk obstetrics and maternal fetal medicine at Johns Hopkins. She's got the brains of the family, I just sort of hang out.
LAMB: Where did you meet her?
ORR: I met her through a mutual friend here in Washington D.C. and I married up, she seemed a little -- a little out of my league but I kept trying and managed to convince her it was worth the shot.
ORR: Two young children, love them to death, meaning of life, son Kevin and my daughter Lexy.
LAMB: And how old are they?
ORR: Seven and nine.
LAMB: Seven and nine. Well, let's go back to another -- I don't even know that you call this a bump in the road, but this certainly was the controversy in November 2014, back to WXYZ, I thank them again for providing this, let's watch this.
(BEGIN VIDEO CLIP)
UNIDENTIFIED PARTICIPANT: While they were arguing to cut pensions, health care and stiff other creditors, they were giving themselves raises costing taxpayers more. As we reviewed more than 10,000 pages of invoices we couldn't help but notice those filed by Jones Day, the lead law firm handpicked by Governor Snyder.
GOVERNOR SNYDER: These attorneys and professionals are on their honor when they submit their bills .
UNIDENTIFIED PARTICIPANT: No. It's not an open checkbook.
Take for example partner Jeffrey Ellman. His hourly rate at the start of bankruptcy, 825 an hour, this year jumped to 900 bucks, an increase of nine percent, another partner Elena Kaplin, her rated rocketed 12 percent from 600 an hour to 675. It was a little less for Todd Swartzler, only a 10 percent increase from 700 to 775 an hour. Did you get a pay raise this year?
No pay raise.
FEMALE: No pay raise.
(END VIDEO CLIP)
LAMB: So, what did you say to people when this came out?
ORR: Well, I'm going to -- I'm going to be -- I had to be a little quiet at that time because I was emergency manager and these are my professionals but I'm going to be a little bit louder about this and very -- going to defend the law firm in three levels.
One, the level of work that the law firm had to do and I said this before during the representation considering, you know, areas such as bankruptcy trial, appeal, project finance, labor, health care, there were 28 different work streams that one firm handled and as Judge Rhodes said in his opinion, perhaps on an exceptional level, the city should be very thankful for it, so it was an incredible representation and an incredible a lot of work.
Certainly in any major representation I've been and someone's come along and said look at this because it drives the white collar versus the working class narrative, that sort of the silk-stocking law firm is feasting on this, that is not true. The reality is that this law firm when I was not with it but I'm going to defend it very strongly. This law firm adjusted its fees over double digits discount, over 20 percent was adjusted down to that.
Second, with the rate increases that Jim pointed out, that happens every year in a law firm. It does a combination of not just inflation but based upon the attorney's experience as they go through their practice area, certainly though, coming from a family of both my grandmothers were maids. My mother grew up in a single parent household. My paternal grandfather had to be run out of the house by my uncle because he was beating my mother with a razor strap so badly.
I can understand how someone on a perhaps more average background might look at some of these numbers and be concerned and not really understand them. For instance, I don't really even tell my own mother what my compensation is, because it is certainly (inaudible) from where she came to where I've had I've had the transit of success and I hope I am judged by the content of my character as Martin Luther King Jr. said.
And I've had some measure of success in that regard. It is certainly significant relative to where she started so I'm sympathetic to that, but given the work that we did in the firm, the level of the project, the time that it was taking to deal with 60 years of neglect and decay for the law firm, I would say that there was value given for the payments that were made.
LAMB: Let me ask. I've stumbled through this question. You're doing pretty well.
ORR: I hope so.
LAMB: Okay. Have you noticed a change in the way people look at you? You know, we hear all the discussion about race and color, but as you've done better and better the people look at you differently. Do they get past the race?
ORR: No. No. I'll give you an anecdote. It depends upon the time of day. If I'm driving home, dressed like this then I will get a different approach than the cops that approached me when I was a teenager who decided to go to practice law because I was being hassled as I went across the wrong railroad truck. If I'm driving on the weekends, in fact, I'll give you an even better anecdote. My wife and I when our son was six months old, moved into our neighborhood in Chevy Chase, Maryland which is perceived to be a pretty nice community in Northwest Washington D.C.
We pulled out of our subdivision that night after we closed with our little six month old baby in back and lights started flaring, cops pulled us over said, "Do you know why I pulled you over?" I said, "Yeah, I think you pulled me over because we have a left rear brake light that's out and you know by the way I've gone by the dealership this afternoon and here are the bulbs but I just haven't had time replace it which I'll do tonight.
My wife the doctor me the lawyer dressed casually with our son in his little rearward facing car seat. For the next hour and 15 minutes they sat there with a spotlight shining in the back. Montgomery county police shining in the back of the car on my young baby while we had the lights, running tags trying to find something I suspect because I know a little bit about police procedure now because I supervised DPD for two years, Detroit police force, trying to find something I suspect on what we were doing if no reason. So, finally after about 40 minutes I said my wife I'm going to go out and talk to this guy. I went to open the door, she put her arm on mine, said "Don't go, they'll kill you." She says you won't come back.
So, we have to process that and that environment coming out of our new house in a very nice subdivision with the light shining on my six month old in this car for no reason. So, it's a very troubling thing and I do think that we're at a cross roads in this nation. There's a disconnect between people. Some people say, "Well, it can't possibly be that bad." But then you look at the fact at a number of interactions in Ferguson for instance. The real story of Ferguson wasn't just oppressive policing and police behavior. It was an integrated economic model through the administrative judge, the city council to drive fee saturation, tax saturation on the citizens so they could increase their budget to run an operation to drive further tax saturation.
In fact when good cops in Ferguson came and said, "We don't like doing this, we think it's unfair" they were told, "Shut up write more tickets." So, you see the disconnect between the people who pay your salary and the people who are oppressing those and there's no belief in the legitimacy of that process because from their perspective, the average inner city citizen, that's not a legitimate process. Juxtapose that though against the folks in Baltimore now where Freddie Gray was killed.
Month after Freddie Gray was killed, 31 people died. Two months after that, 45 young black men were killed. It appears to be a little throttling back on aggressive policing. So, this is all very sensitive stuff that we need to spend some time cycling through, but it has a real impact, people die. But yes, I -- no matter who you are, no matter where you are, as President Obama said if he had son, his son would look like Trevan. I have a son. He's nine years old, in three or four years he's going to be Trevan, I am concerned for his life because you're not going to see the son of a corporate law partner and a noted physician. They're just going to see another little black kid.
LAMB: I know you talked about this in Detroit, you had an interview out there where this subject was brought up. What do you tell your nine year old or your daughter and what have you told them about this?
ORR: I haven't told them anything yet because they -- fortunately still sort of live in this cocooned world in Northwest, Washington D.C., but I'm going to have to have a conversation probably with my son. I've got to tell him three things. I've got to tell him three things. I've got to tell them how to speak cop, use proper diction and that's not so much so they will change their behavior, that's to let them know that if something happens to him, something is going to happen to them. Okay. I'm an attorney I will come after them with everything I possibly can if you harm my child. I love my child just as much as you love your child. He's a citizen, treat him with respect.
But I have to teach him not to give a precedent, not to give a prima facie case, not to give an indicia because the minute you say something that's intemperate, you're now disorderly and anything can happen, it can escalate. As we saw with the poor woman down in Texas. She was stopped for failing to signal and she ends up dead. Okay. I have to teach him another thing -- another thing. Many of the kids we grow, we're fortunate here in Washington D.C. , a Blue States we're very diverse. We have people of all stripes and all colors, intermarried, growing together, we go to birthday parties, play dates, pool, our kids swim on their -- on their swim team, it's a very lovely environment.
Somewhere about 12 and 13 when kids start going to the mall together, going to movies, pre-dating age and maybe not the parents but somewhere Uncle Bob will call and say, you know, "Why is that little boy over here again," and maybe he doesn't take you to the prom, the junior prom or maybe you don't want to date them. Several messages are to come in. And what happens is and what certainly happened before is the friends they've known all their lives will start falling off. I had a conversation like this with Bill Clay Ford Jr. It was very insightful.
His son married a -- his daughter married a diverse individual and he brought him in and he recounted this to me and said, "You know, I want to make sure you understand what's going to happen, I'm all for the marriage. I want to make sure you're committed" So, here I am an African-American, here is a white American, a noted family but both of us have to cycle through this but there are going to be people who aren't happy to see you and you need to be prepared for that, and then the final thing I have to teach him the meaning of the N word whether it's said as an affinity term which he hasn't heard yet, believe it or not.
Whether it said -- or whether it's said just like that kid who was at Yale, was where he was supposed to be at someone rolls up and throws it out as an invective. And so I talk about this with the other African-American professionals in our community who are very well accomplished, highly educated. You know, are we protecting our children too much. Are they in the cocoon too much, do we need to expose them we want to inoculate them but we don't want to infect them.
And how we go about doing that? Inoculate them against racism but not infect them with it and that's the challenge that even, you know, sort of white collar African-American professionals have this day.
LAMB: In the couple of minutes we have left. Go back to the Detroit story again and in the end you got people to forgive seven billion dollars worth of debt?
ORR: Yeah. Yeah.
ORR: Well, we, you know, and you can do anything with four things, Brian. You need leadership. Certainly Governor Snyder provided leadership to start and Mayor Duggan in cooperation we worked together, Three, you need talent, you need transparency, you need cooperation.
So, we sat down at the bargaining table with our stakeholders both financial side and labor side and we said, "Look, we can't pay you" we've set it out in our proposal June 14th that's not -- it's just math. The math isn't going to change. Let us talk about what we can do for you and there were some help from the foundation community. Some of the mediators, Judge Rosen and mediators we came with the so called grand bargain where the foundations and the state legislators voted 107 to 5 to provide us with $820 million dedicated to helping pension funding so that we preserved the Detroit Institute of Arts and that was really a breakthrough.
So, a lot of cooperation, a lot of tough negotiations, but people of good faith working together help getting it going.
LAMB: But in the middle of all this, this city was still able to float the $407 million bond to build the Red Wings Hockey Rink.
ORR: Well, we -- that was state assistance by way. We had -- the city had three bond issues. This is where the public lighting authority, we had a bond issue for the DW -- Detroit Water and Sewer Department tender, one point five billion dollars was refunded, and then we had a private placement regarding the exit facility, exit financing and bankruptcy, so the capital markets are remarkably, for the most part remarkably logical and when they see an enterprise can pay go, pay as it goes and has better financial condition, we got where I think the PLA Lighting was at about three point seven five. I thought it would have gone lower than four point two. So, we were able to have some success with our debt, we can pay as we go forward. Our surplus lines look good going forward, it wasn't easy but it was a good outcome.
LAMB: How much attention did President Obama give you personally in this issue when you were going through this?
ORR: Well, the president's office and the president's cabinet were front and center. I mean, Shaun Donovan initially, Tony Foxx over at transportation, Shaun Donovan over at HUD, Eric Holder, certainly U.S. attorney so that the federal government was, in fact we convened in the fall of 2013 a stakeholder's meeting, where over 60 participants including various departments of the federal government.
Gene Sperling who's in OMB oversaw this, brought us all together, said, "This is what we can do to assist you with federal grants, to assist you with and (cry) -- safer grants for public safety functions. This is what we can do and that still continues, the White House has Detroit Task Force that just went with the mayor, Mayor Duggan to Japan and I think they came back with almost $30 million of commitment from a private sector factory to rebuild in the city and many more probably to come.
So, it was very helpful having the federal partners there, helping us in kind, but we knew straight on at the end of the day, we were going to have to fix it ourselves.
LAMB: So, in the middle of all this, Kwame Kilpatrick, Mayor of Detroit goes to prison, he's in Oklahoma in the same prison that the president visited. He's going to be there if he doesn't get a pardon for 28 years.
ORR: 28 years.
LAMB: How much do you blame him for what happened?
ORR: Brian, I've tried to stay away from blame. There's enough blame to go around. Certainly -- I will say this, certainly the level of defalcation. I think Barbara McQuade the U.S. Attorney, 119 page indictment, 119 count indictment. And I think they were able to account for $75 million that was taken, and some of the estimates I've seen go up as high as $200 million that was taken during the Kilpatrick administration.
So, there will be -- I am sure a number of stories and recollections about that era. What I've tried to say is that existed. It was certainly not helpful, it was exactly the wrong time. That was pre-K, before Kevyn and I've got to move on beyond it. That was my job and I'm happy to say we were able to get that done successfully.
LAMB: When did you decide to go back to Jones Day Law Firm?
ORR: Oh, I took some time off for about six months. I spent some time with the family. I looked to some other opportunities which were very flattering. In fact, almost came close to a couple others, but there was never going to be another law firm. I love my law firm. It is a unique place to me. It has certainly been embracing to me.
I now head the Washington D.C. office but I did want to look at some other areas in terms of consulting and banking and that just seemed -- it just seems like the right fit, as for me, it's an exceptional institution, it's an international institution. I have a great deal of affection for it.
LAMB: The Jones Day Law Firm offices are just a block from here.
ORR: Right. Right.
LAMB: And the shadow of the Capitol and the old Acacia insurance building, what kind of power center does that make it for you?
ORR: I don't know. You know, I'm always careful to shy away from it, and Washington D.C. to talk about power centers, there's so many people in Washington D.C. that have been something somewhere. We still have living ex-attorney generals that are practicing law, ex-U.S. Supreme Court clerks, justices, ex-presidents, ex-senate majority leaders, senate minority leaders are still practicing.
We like to think of ourselves as a full service international law firm that does pretty well. We had some notable successes over the past couple of years of which we're proud, all that entitles us to is to keep running hard and make sure we can keep producing those outcomes for the benefit of our clients but we're all aware all of us because we're pretty much a working class crowd of people. We're doing okay and we're very fortunate to have had that opportunity.
LAMB: Our guest has been Kevyn Orr, who was the Emergency Manager of Detroit Michigan for March 14, 2013 to no, from March 14th, 2013. December 19th, 2014.
ORR: Yes sir.
LAMB: And now the city is out of bankruptcy. Thank you very much.
ORR: Thank you, Brian.