Bankruptcy isn't cheap.
The city's cost for attorneys, accountants and other outside strategists has reached $12.8 million so far, according to The Detroit News.
The data offers the first comprehensive breakdown of expenses being charged by 11 firms now working for Detroit. It sheds light on the rising cost of the city’s restructuring and was obtained one day after a federal judge hired a watchdog to scrutinize expenses.
The money is enough to pay for 2½ years of benefits for more than 166 retirees who are fighting proposed pension cuts during the city’s bankruptcy case. . . .
The money was spread among firms that employ lawyers, accountants, financial analysts and public-relations consultants who collectively have contracts worth almost $37.7 million.
More than half of the money, $6.6 million, went to the firm Ernst & Young for cash flow analysis, according to data obtained through the Freedom of Information Act.
“The bankruptcy process is a very expensive way to solve financial problems,” a local specialist says.
The article by Robert Snell and Christine Ferretti quotes Bingham Farms turnaround consultant, who's not among Detroit's advisers, as saying that bankruptcy always "is a very expensive way to solve financial problems.”
"This is the largest municipal insolvency in the history of the United States, so I am not at all surprised at these kinds of fees. The city has a long road to go.”
The News also speaks with Bill Nowling, spokesman for Emergency manager Kevyn Orr, who says each consulting firm is "giving us a discounted rate."
"We are trying to be as frugal as we can be. But these people are tackling not just the bankruptcy but restructuring and projects that have been deferred for decades.”
U.S. Bankruptcy Judge Steven Rhodes this week appointed Chicago lawyer Robert Fishman to examine fees charged by lawyers and consultants in Detroit’s bankruptcy case.
