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CITYOFDETROIT

PROPOSALFORCREDITORS
EXECUTIVESUMMARY
JUNE14,2013

13-53846

Doc 11-2

Filed 07/18/13

Entered 07/18/13 21:44:51

Page 2 of 66

This proposal is based on numerous projections and assumptions concerning future uncertain events including estimates of tax revenues and forecasts of future business and economic conditions in the City, all of which are beyond the control of the City. Actual results may differ from the assumptions and projections presented herein, and such differences could be material. Additional data are being gathered or developed, and various critical financial and operational analyses remain in process. Thus, this proposal remains subject to material change.

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TableofContents
I. DetroitFacesStrongEconomicHeadwinds II. KeyObjectivesforaFinancialRestructuringandRehabilitationofDetroit III. CurrentFinancialStatus IV. The h City i HasTaken k Action i toAddress dd ItsFinancial i i lChallenges h ll V. RestructuringandReinvestinginCityGovernment VI RealizationofValueofAssets VI. VII. TenYearProjections(GeneralFundOnly) gProposal p VIII. Restructuring IX. CalendarandContacts 3 33 34 39 41 46 47 50 61

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I. DetroitFacesStrongEconomicHeadwinds.
DeterioratingMacroeconomicConditions. Conditions Duringthepastseveraldecades, decades theCityof Detroit(the"City")hasexperiencedchangesthathaveadverselyaffectedtheeconomic circumstancesoftheCityanditsresidents. EmploymentinDetroit 350,000 325,000 300,000 275,000 250,000 250 000 2000

2001

2003

2005

2007

2009

2011

2012

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I. DetroitFacesStrongEconomicHeadwinds.
UnemploymentRateinDetroit 30 25 20 15 10 5 2000

2001

2003

2005

2007

2009

2011

2012

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I.DetroitFacesStrongEconomicHeadwinds.

ErodingTaxBaseandReductionsinStateRevenueSharing. Sharing - PropertyTaxes.Propertytaxrevenueshavedecreasedbyapproximately19.7%


overthepastsixyearsasaresultofdecliningassessedvalues($1.6billionfrom2008 to2012)andlowercollectionrates(from76.6%in2008to68.3%in2012). - IncomeTaxes.Incometaxrevenueshavedecreasedby$91millionsince2002 (approximately30%)andby$44million(approximately15%)since2008.The primarycauseofthesedecreaseshasbeenhighunemployment. - TheCity yiscurrently ylevying y galltaxesatornearstatutory ymaximumrates.

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I.DetroitFacesStrongEconomicHeadwinds.
ResidentsandbusinessesareleavingDetroittoescapeHighTaxesandInsuranceCosts Costs. ComparativeTaxBurden. - PerCapitaTaxBurden.DetroitspercapitataxburdenonCityresidentsisthe highestinMichigan.Thistaxburdenisparticularlyseverebecauseitisimposedona populationthathasrelativelylowlevelsofpercapitaincome. - ResidentIncomeTax.TheincometaxburdenonDetroitresidentsisgreaterthan thatofresidentsinthesurroundingarea.TheCity'sincometax 2.4%for g in residents,1.2%fornonresidentsand2.0%forbusinesses isthehighest Michigan. - PropertyTaxes.Detroitresidentspaythehighesttotalpropertytaxrates(inclusive ofpropertytaxespaidtoalloverlappingjurisdictions;e.g.,theCity,theState,Wayne County)ofthosepaidbyresidentsofMichigancitieshavingapopulationover 50,000.Thetotalpropertytaxrate(includingpropertytaxesassessedbytheCity, theStateandvariousspecialauthorities)imposedonDetroithomeownersis approximately67.07mills;forbusinesses,thetotalpropertytaxrateis approximately85.35mills. - Atmorethan19.95mills,theCity'spropertytaxrateforgeneraloperationsis closetothestatutorymaximumof20.00mills. - UtilityUsersTax.DetroitistheonlycityinMichiganthatleviesanexcisetaxon utilityusers(atarateof5%) 5%).

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I.DetroitFacesStrongEconomicHeadwinds.
The City is Insolvent ContinuingBudgetDeficits. Excludingtheeffectofrecentdebtissuances(e.g.,$75millioninFY2008,$250millionin FY2010and$129.5millioninFY2013)thatfundedtheCity'soperatingdeficits,theCity's accumulatedgeneralfunddeficithasgrowncontinuouslyoveranextendedperiod.

AttheendofFY2012, ,theCity's y accumulatedg generalfunddeficitwas$ $326.6million. IfnotfortheCitysrecentdebtissuances,theprojectedaccumulateddeficitforFY2013


wouldhavebeenapproximately$700million.
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I.DetroitFacesStrongEconomicHeadwinds.
LiquidityCrisis Crisis.TheCityisinsolvent insolvent.Absentongoingcashintervention(primarilyinthe formofpaymentdeferralsandcostcutting),theCitywouldhaverunoutofcashbeforethe endofFY2013. TheCityhadnegativecashflowsof$115.5millioninFY2012,excludingtheimpactof proceedsfromshorttermborrowings. borrowings InMarch2012, 2012 toavoidrunningoutofcash cash,the Cityborrowed$80milliononasecuredbasis(ofwhichtheCityspent$50millionin FY2012). TheCityisprojectingtohavepositivecashflowsof$4.0millioninFY2013after d f i approximately deferring i l $120million illi of fcurrentand dprior i yearpension i contributions ib i andotherpayments. Absentinterventionand/orrestructuring,theCityisprojectingtohavenegativecash flowsof$198.5millioninFY2014. AsoftheendofMay2013,theCityhad$68millionofcashbeforepropertytax distributions,buthadoutstandingdeferralsandamountduetootherfundsandentities ofapproximately$216million.Theseareeffectivelyborrowingsandmustberepaid.

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I.DetroitFacesStrongEconomicHeadwinds.
TheCityisNotPayingItsDebtsasTheyComeDue TheCityisnotmakingitspensioncontributionsastheycomedue.TheCityhas deferredpaymentofitsyearendPoliceandFireRetirementSystem("PFRS") contributions(andfinancessuchdeferralsatarateof8%).AsofMay2013,the Cityhaddeferredapproximately$54millioninpensioncontributionsrelatedto currentandpriorperiodsandwilldeferapproximately$50milliononJune30,2013 forcurrentyearPFRS pensioncontributions.Therefore,byfiscalyearend,theCity willhavedeferredover$100millionofpensioncontributions. The Th Ci Citywill illnotmake k the h scheduled h d l d$39 $39.7 7million illi paymentsd dueoni its pensionrelatedcertificatesofparticipationonJune14,2013.

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I.DetroitFacesStrongEconomicHeadwinds.
FY2013ForecastedCashflowtoYearEnd

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I.DetroitFacesStrongEconomicHeadwinds.
FY2014ForecastedCashFlowtoYearEnd

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I.DetroitFacesStrongEconomicHeadwinds.
Current Levels of Municipal Services to Residents and Businesses are Severely Inadequate. TheCityMustReduceItsHighCrimeRates. In2012,theCityhadthehighestrateofviolentcrimeofanyU.S.cityhavinga populationover200,000.TheCity'sviolentcrimerateisfivetimesthenational average. EMSandDetroitFireDepartment("DFD")responsetimesareextremelyslowwhen comparedtoothercities(15minutesand7minutes minutes,respectively) respectively). TheCityMustProvideFunctioningStreetLights. AsofApril2013,approximately40%oftheCity'sstreetlightswerenotfunctioning. Thelightsthatarefunctioningarescatteredacrossanoutdatedpopulationfootprint (andthusarenotfocusedtomeetthecurrentpopulation'sactualneeds). TheCityMustOverhaulItsDysfunctionalOperations. PoliceDepartment("DPD"). - Over O the th last l tfive fi years,the th DPDh hash had dfi fivediff different tpolice li chiefs, hi f all llh having i varyingapproachestoDPD'soperations. - DPD'sefficiency(responsetimes),effectiveness(caseclosurerate,crimereduction) andemployeemoraleareextremelylow. - DatadrivenpolicinghasnotbeenfullyadoptedwithinDPD.
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I.DetroitFacesStrongEconomicHeadwinds.

- DPDreceivesover700 700,000 000callsforserviceannually annually.DPDresponsetimesare


extremelyhigh. - TheDPD'sextremelylow8.7%caseclearancerateisdrivenbytheDPD'slackofa casemanagementsystem,lackofaccountabilityfordetectives,unfavorablework rulesimposedbycollectivebargainingagreementsandahighattritionrateinthe investigativeoperationsunit. - TheDPD'smanpowerhasbeenreducedbyapproximately40%overthelast10years causingconstantstrainontheorganization;theDPDneedstoevaluateappropriate uniform if staffing ffi l levels. l - Communitypolicingeffortsareunderfunded,uncoordinatedandhavebeen deemphasizedbytheDPD. Assessor Assessor's sOfficeandPropertyTaxDivision. ivision. - TheCitylacksastaterequiredLevelIVAssessorandcurrentlyhasaformer employeecontractorintheposition,whosecontractexpiresinJune2013.Dueto inadequatecompensation,amongotherthings,therearenoavailablecandidatesto fillthisposition. position - TheAssessorsOfficehasapproximately15,000parcelsperemployee.TheState recommends4,000parcelsperemployee. OtherDepartments. - ManyotherCitydepartmentsfunctionsuboptimallyandinefficiently.
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I.DetroitFacesStrongEconomicHeadwinds.
ThePhysicalDeteriorationoftheCityMustbeAddressed Addressed. Thereareapproximately(i)78,000abandonedandblightedstructuresintheCity, nearlyhalfofwhichareconsidered"dangerous"and(ii)66,000blightedandvacant lotswithintheCitylimits. ThenumberofCityparksisdwindling,andmanyareinpoororfairconditionasa resultofneglectduetolackoffunding. - Theclosureof210parksinthe200809fiscalyearreducedtheCity'sparkportfolio y66% from317p parksto107p parks. by Approximately70superfundsiteshavebeenestablishedinDetroit. TheCity'selectricitygridhasnotbeenadequatelymaintainedandisdeteriorating. TheCity'sfirestationsareoldandarenotadequatelymaintained. ThevehiclesandequipmentemployedbytheCity'spolice,fire,EMSand transportationpersonnelareaging,poorlymaintainedandlackadequateinformation technology.

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I.DetroitFacesStrongEconomicHeadwinds.
Detroit Has Endured Inadequate Investment in Infrastructure and Equipment for Years. FireDepartment. FireApparatus.TheDFDfleetincludes(i)26engines;(ii)15laddertrucks;(iii)six squads(specializedrescuevehicles);(iv)onehazardousmaterialapparatus;(v)one TACunit(aminipumper)and(vi)36ambulancesandotherlightvehicles. DFD'sfleethas"manymechanicalissues,"containsnoreservevehiclesandlacks equipmentordinarilyregardedasstandard. standard - TheApparatusDivision'smechanictovehicleratioof1:39(oncestaffedwith 63people;currently26)resultsinaninabilitytocompletepreventativemaintenance onschedule. - Detroitfirefightersfrequentlyoperateshorthandedduetoalackofserviceable equipment. EMSFleet. - Duringthefirstquarterof2013 2013,frequentlyonly10to14oftheCity's City s36ambulances wereinservice. - SomeoftheCity'sEMSvehicleshavebeendriven250,000to300,000miles,and breakdownfrequently.

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I.DetroitFacesStrongEconomicHeadwinds.
PoliceDepartment. Department AgeofPoliceCars - TheDPDoperateswithan"extremelyoldfleet"of1,291vehicles.MostDPDpolice cruiserslacknecessaryinformationtechnology. - Amajorityofvehiclesinthefleetremaininservicebeyondanormalthreeyear replacementcycle.Operatingwithanagedfleetdrivesupmaintenancecosts. Facilities - The Th DPDh hasnotinvested i din i ormaintained i i dits i facility f ili infrastructure i f for f manyyears, contributingtolowemployeeandcitizenmorale. InformationSystems Challengesgenerally: - Oldandobsoletetechnologyassetsandapplicationsmustbeupgraded. - ITinfrastructureisnotintegratedwithinDepartments(e.g.,policeprecinctsand districtscannotshareinformationacrossITsystems)orbetweendepartmentsand f ti (e.g., functions ( little littl to t nointegration i t ti between b t coreCity Cit finance fi system t and d Departmentlevelsystems). - City urgently needstoupgradeorreplacethefollowingITsystems,amongothers: payroll;financial;budgetdevelopment;propertyinformationandassessment; incometax;and dDPDoperatingsystem.
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I.DetroitFacesStrongEconomicHeadwinds.

DPD DPD,DFDandEMS - DPD,DFDandEMSinformationtechnologysystemsareobsolete;vendorsdonot


providefullsupport;corefunctionsaresporadic. - DPDhasnoITsystemsforjailmanagement,electronicticketingandactivitylogs. DPDvehicleslacknecessaryITinfrastructure. PayrollSystem - TheCityusesmultiple,nonintegratedpayrollsystems.Amajorityofemployees areonanarchaicpayrollsystemthathaslimitedreportingcapabilityandnoability toclearlytrack,monitororreportexpendituresbycategory. - ThecostofpayrolladministrationfortheCityissignificantlyhigherthanfor comparableentities almost3.5timesmorecostlythanotherpublicsector organizations whichaverage$18perpaycheck. organizations, paycheck IncomeTaxDivision - Incometaxcollectionanddatamanagementarehighlymanual. - TheCity's City sIncomeTaxSystemisoutdated(purchasedinthemid1990s), 1990s) haslittle tonoautomationcapabilityandis"catastrophic"peranIRSauditcompletedin July2012.

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I.DetroitFacesStrongEconomicHeadwinds.

Budgeting Budgeting,Accounting&FinancialReportingSystems - OraclebasedFinancialReportingsystemwasimplementedin1999.Itisnotbeing


utilizedtoitsfullcapabilitiesandisnolongersupportedbyitsmanufacturer. - Approximately70%ofjournalentriesarebookedmanually. GrantManagementSystem - Granttrackingsystemsarefragmented.Thus,theCityisunabletocomprehensively trackcitywidegrantfundsandstatus. - Grant G reporting i is i notstandardized, d di d such hthat h the h City Ci is i unable bl toprevent disallowedcosts. Permitting - TheBuildings, uildings,SafetyEngineering ngineeringandEnvironmental nvironmentalDepartment's epartment ssystemfor licensingandpermittingismorethantenyearsoldandneedstobeupgraded. - TheFireMarshallDivision'ssystemforinspectionsandpermittingismorethan 20yearsoldandneedstobereplaced. - Current C tinformation i f ti technology t h l system t deficiencies d fi i i lead l dto t b bottlenecks ttl k i inpermit it invoicingandcollectionoffees. DepartmentofTransportation.DDOTfleetisagedandmaintenanceisconsistently deferred;approximatelyonethirdofDDOTfleetisoutofservice.

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I.DetroitFacesStrongEconomicHeadwinds.
ElectricalTransmissionGridandFixtures TheCityownedMisterskypowerplanthasbeenidleforapproximately23years,but hasnotbeendecommissioned.Inaddition,theCityhas31substationsthatwould needtobedecommissioned.TheCityisintheprocessofobtainingestimatesfor decommissioningcosts costs. Approximately40%ofDetroit's88,000streetlightsarenotfunctioningdue,inlarge part,todisrepairandneglect;outagesexistonbothDTEEnergyCompany("DTE")and PLDpoweredlights.

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I.DetroitFacesStrongEconomicHeadwinds.
The City Citys s Debt and Legacy Liabilities Have Grown Considerably Over Time Time. BalanceSheetLiabilities TheCityestimatesthat,asofthecloseofits2013fiscalyear,theCitywillhave liabilitiesreflectedonitsbalancesheetofapproximately$9.05billion,including: - $5.85billioninspecialrevenueobligations; - $1.43billioninpensionrelatedCertificateofParticipation("COPs")liabilities; - $343.6millioninmarkedtomarketswapliabilitiesrelatedtoCOPs(asof M 31, May 31 2013valuation); l i ) - $1.13billioninunlimitedandlimitedtaxgeneralobligationbondliabilitiesand notesandloanspayable;and - $300millioninotherliabilities.

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I.DetroitFacesStrongEconomicHeadwinds.
OffBalanceSheetLiabilities OPEBLiabilities. - Unfundedotherpostemploymentbenefit("OPEB")liabilitiesincreasedfrom $4.8 billionto$5.7 billionfromJune 30, 2007throughJune30,2011(themost recentactuarialdataavailable).99.6%oftheCity'sOPEBliabilitiesareunfunded. - AsofJune30,2011(themostrecentlypublishedactuarialvaluation),therewere 19,389retireeseligibletoreceivebenefitsundertheCity'sOPEBplans.Thenumber gbenefitsfromtheCity yisexpected p toincreaseovertime. ofretireesreceiving - Weiler ClassOPEBBenefits. - InJuly2006,theCitymadeanumberofunilateralchangestothehealthcare benefitsforunionizedpoliceandfirefighterretirees.AlanWeilerfiledaclass actionlawsuitonbehalfofapproximately7,000 7 000retireesallegingviolationsof collectivebargainingagreements. - TheCityandtheWeiler classsettledbeforetrial,andthecourtenteredaConsent Judgmentapprovingtheparties'settlementagreement. - TheWeiler classretirees/beneficiariescurrentlycosttheCityapproximately $75millionperyear,representingover40%ofretireebenefitscostsunderthe HealthandLifeInsurancePlan.

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I.DetroitFacesStrongEconomicHeadwinds.

PensionLiabilities - TheCity'sreportedpensionUAAL(basedon2011actuarialvaluations)of
$639,871,444issubstantially understated.Furtheranalysisusingmorerealistic assumptions(includingbyreducingthediscountratebyonepercentagepoint) suggeststhatpensionUAALwillbeapproximately$3.5 $3 5 billionasofJune 30, 30 2013. 2013 - UAALundertheCity'stwopensionsystems theGeneralRetirementSystem ("GRS")andthePFRS increasedbyover$1billionbetweenJune30,2007and June 30, 2011,even(i)usingactuarialassumptionsusedtocalculate2011UAALand (ii) after f consideration id i of fthe h contribution ib i of fthe h COP COPsproceeds d i in2005and d2006 2006. - ForthefiveyearperiodendingonJune30,2012,pensionpaymentsandcostsof administrationhaveexceededcontributionsandinvestmentincome,resultingin liquidationofpensiontrustprincipal.Continuingonthispathwilleventuallylead tothepensionplansinsolvency.

System GRS PFRS

BenefitPayments $1,601,193,045 $1,445,581,026

Contribution/Investment Income ($60,113,101) ($127,803,339)

NetTrustLoss $1,661,306,146 $1,573,384,365

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I.DetroitFacesStrongEconomicHeadwinds.

IncreasingLegacyLiabilitiesasaPercentageofGeneralFundRevenue Revenue. During


FY2012,morethan38%oftheCitysactualrevenuewasconsumedservicinglegacy liabilities. Goingforward,legacyliabilitiesareexpectedtoconsumeincreasingportions ofCityrevenues.
Legacy Expenditures (Assuming No Restructuring)
($ in millions) 2008 Legacy expenditures Debt service (LTGO) Debt service (UTGO) POC principal and interest (GF) POC principal and interest (EF, excl. DDOT) POC principal and interest (DDOT) POC swaps (GF) POC swaps (EF, excl. DDOT) POC swaps (DDOT) POC swaps (DDOT) Pension contributions Public Safety Pension contributions NonPublic Safety Pension contributions DDOT Health benefits retiree Public Safety Health benefits retiree NonPublic Safety Health benefits retiree DDOT Total l legacy l expenditures d Total revenues (excl. financing proceeds) Total legacy expenditures as a % of total revenues $ (66.6) (67.2) (24.6) (1.8) (3.5) (38.6) (2.3) (4.5) (4 5) (58.9) (10.6) (6.8) (73.7) (47.4) (8.2) $ (414.6) $ ( ) $ 1,397.7 Fiscal year ended actual 2009 2010 2011 $ (106.2) (71.5) (20.9) (1.4) (2.8) (43.9) (2.0) (4.0) (4 0) (31.4) (27.0) (7.3) (80.2) (51.6) (11.8) $ (462.0) $ ( ) $ 1,363.3 $ (63.5) (72.4) (23.6) (1.5) (3.0) (44.7) (2.0) (4.0) (4 0) (32.8) (11.1) (6.9) (70.4) (50.6) (11.2) $ (397.9) $ ( ) $ 1,291.0 $ (64.5) (72.8) (33.5) (1.8) (3.6) (44.7) (2.0) (4.0) (4 0) (81.6) (28.3) (9.5) (79.6) (49.0) (11.1) $ (486.1) $ ( ) $ 1,316.8 2012 $ (62.6) (73.0) (33.0) (2.0) (4.0) (44.8) (2.0) (4 0) (4.0) (49.8) (25.4) (10.9) (90.6) (49.2) (10.3) $ (461.6) $ ( ) $ 1,196.9 2013 $ (70.8) (70.6) (46.8) (5.3) (3.3) (42.9) (4.8) (3.0) (3 0) (46.1) (19.9) (12.3) (91.5) (49.7) (10.4) $ (477.3) $ ( ) $ 1,121.9 Preliminary forecast 2014 2015 2016 $ (70.9) (64.9) (51.4) (5.9) (3.7) (42.8) (4.8) (3.0) (3 0) (139.0) (36.9) (23.6) (88.6) (38.8) (13.3) $ (587.6) $ (5 ) $ 1,082.8 $ (61.8) (62.5) (53.3) (6.1) (3.8) (42.8) (4.8) (3.0) (3 0) (163.0) (42.5) (27.7) (95.2) (41.5) (14.3) $ (622.4) $ ( ) $ 1,046.2 $ (61.8) (57.6) (55.0) (6.4) (3.9) (42.7) (4.9) (3.0) (3 0) (180.0) (47.7) (31.2) (101.7) (44.6) (15.3) $ (655.9) $ ( 55 ) $ 1,041.5 2017 $ (38.5) (57.6) (56.9) (6.6) (4.1) (42.7) (4.9) (3.0) (3 0) (198.0) (53.1) (34.8) (108.0) (47.7) (16.3) $ (672.3) $ ( ) $ 1,041.4

29.7%

33.9%

30.8%

36.9%

38.6%

42.5%

54.3%

59.5%

63.0%

64.6%

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I.DetroitFacesStrongEconomicHeadwinds.
ObligationsSecuredbySpecialRevenues TheCityestimatesthat,asoftheendofFY2013,itwillhave: - $5.34billioninoutstandingprincipalamountofrevenuebonds;and - $494millioninrelatedstaterevolvingloans. Therevenuebondsandtherevolvingloansarerelatedtothefollowingfunds: - SewageDisposalFund - $2.82billioninoutstanding gp principal p amountofnotesmaturing gJuly y1,2013 throughJuly1,2039,asofJune30,2013. - $472.8millioninoutstandingprincipalamountofstaterevolvingloans,asof June30,2013. - Substantiallyallrevenuesofthesewagedisposalsystem, system netofoperating expenses,pledgedtosecurepaymentofprincipalandinterest. - Netsystemrevenuesof$227,447,337versusdebtservicerequirementsof $199,990,125inFY 2012.

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I.DetroitFacesStrongEconomicHeadwinds.

- WaterFund
- $2.52billioninoutstandingprincipalamountofvariousseriesofnotesmaturing

July1,2013throughJuly1,2041,asofJune30,2013. - $21.4millioninoutstandingprincipalamountofstaterevolvingloans,asof June30,2013. - SubstantiallyalloftherevenuesoftheCity'swatersystem,netofoperating expenses,pledgedtosecurepaymentofprincipalandinterest. - Netsystemrevenuesof$178 $178,842,057 842 057versusdebtservicerequirementsof $153,441,666inFY 2012. - AutomobileParkingFund - $9.3 millioninoutstandingprincipalamountofDetroitBuildingAuthorityRevenue RefundingBonds:ParkingSystem,Series1998AmaturingJuly1,2010through July1,2019,asofJune 30, 2013. - Substantiallyallrevenuesoftheparkingsystem,netofoperatingexpenses, pledgedtosecurepaymentsofprincipalandinterest. - Netsystemrevenuesof$2,708,223versusdebtservicerequirementsof $2,923,454inFY 2012.

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I.DetroitFacesStrongEconomicHeadwinds.
GeneralFundObligations GOBonds.TheCityestimatesthat,asofthecloseofFY2013(i.e.,June30,2013),itwill have$1.01 billioninoutstandingprincipalamountoflimitedandunlimitedtaxgeneral obligationbonds,consistingof: - $469.1millioninoutstandingprincipalamountofunlimitedtaxgeneralobligation (UTGO)bondsmaturingfromApril1,2013throughNovember1,2035. - $100millionoftheforegoingbondsaresecuredbyasecondlienon distributablestateaid. - $540.3 millioninoutstandingprincipalamountoflimitedtaxgeneralobligation (LTGO)bondsmaturingApril1,2013throughNovember1,2035. - IssuanceofLTGO bondsdonotrequirevoterapproval.Theyarepayablefrom generalnonrestrictedfunds. funds - $249.8millionoftheLTGObondsaresecuredbyafirstlienondistributable stateaid.$129.5millionoftheLTGObondsaresecuredbyathirdlienon distributablestateaid.

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I.DetroitFacesStrongEconomicHeadwinds.

NotesandLoansPayable Payable.TheCityestimatesthat that,asofJune30 30,2013 2013,theCitywill


have$121.5millioninotheroutstandinginstallmentnotesandloanspayablerelatedto variouspublicimprovementprojects. - $87.8millioninnotespayable(whichnoteswereissuedinconnectionwiththe "Section108"HUDLoanGuaranteeProgramandaresecuredbyfuture"BlockGrant" revenues). - $33.7millioninloanspayable($33.6millionofwhichisanoninterestbearing unsecuredloanpayabletotheDowntownDevelopmentAuthorityasgeneral operating i f funds d b becomeavailable). il bl ) OnAugust23,2012,theCityissued$129.5millionofLTGO bondsata$9.1 million premium(generating$137millioninproceedsafterissuancecosts)inparttodefease shorttermbondsissuedMarch2012.Theremainingproceedsoftheseissuanceswere setasidewithatrusteebankinanescrowaccounttoprovidefundsforreformsand liquidityinFY 2013.Thecurrentamountoftheescrowisapproximately$80million.

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I.DetroitFacesStrongEconomicHeadwinds.

CertificatesofParticipation(Pension) - In2005,servicecorporationsestablishedbytheGRSandPFRScreatedatrustthat
issuedtheCOPs.TheproceedsoftheCOPswerecontributedtotheCityspension trusts. - PrincipalandinterestontheCOPsispayablesolelyfrompaymentsmadebytheCity totheservicecorporationspursuanttoservicecontracts. - TheCityestimatesthat,asofthecloseofFY2013,thefollowingamountswere gundertheCOPs: outstanding - $480.3millioninoutstandingprincipalamountof$640,000,000Certificatesof ParticipationSeries 2005AmaturingJune15,2013through2025;and - $948.54 millioninoutstandingprincipalamountof$948,540,000Certificates ofParticipationSeries2006AandBmaturingJune15, 15 2019through2035. 2035 - TheCityhasidentifiedcertainissuesrelatedtothevalidityand/orenforceabilityof theCOPsthatmaywarrantfurtherinvestigation.

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I.DetroitFacesStrongEconomicHeadwinds.

SwapLiabilitiesRelatedtoCertificatesofParticipation Participation. - InconnectionwiththeCOPs,theCityenteredintoeightpayfixed,receivevariable


interestrateswapseffectiveasofJune 12, 2006havingatotalnotionalamountof $800million. - Recentvaluationsestablishthenegativefairvalueoftheswapsatapproximately $343.6million(asofMay31,2013). - January2009 TheCityreceivednoticefromtheswapcontractcounterparties g goftheCOPsandcertainswap pinsurerswouldconstitutean thatdowngrading "AdditionalTerminationEvent"undertheswapcontractsifnotcured. - June2009 TheCityandtheswapcontractcounterpartiesagreedonan amendmenttotheswapagreements,eliminatingtheAdditionalTerminationEvent andthepotentialforanimmediatedemandforpayment.Pursuanttothe amendment,theswapcounterpartieswaivedtheirrighttoterminationpayments, andtheCityagreedto: - directcertainwageringtaxrevenuestoatrustascollateralforthequarterly payments p y owing gtotheswap pcounterparties; p ; - increasetheinterestrateoftheswapagreementsby10basispointseffective July1,2010;and - includenewterminationevents,includingifCOPratingswerewithdrawn, suspendedordowngraded.

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I.DetroitFacesStrongEconomicHeadwinds.

- March2012 COPswerefurtherdowngradedwhichtriggeredanotherTermination
Event;theCityandtheswapcounterpartiesareinnegotiationsregardingthe TerminationEvent. - March2013 AppointmentofEmergencyManagerconstitutesaneventofdefault triggeringanotherTerminationEvent. Event - Althoughthisproposalreflectstreatingtheswapobligationsasspecialrevenuedebt securedbythewageringtaxrevenues,thattreatmentisstillbeingreviewedbythe EmergencyManager.

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I.DetroitFacesStrongEconomicHeadwinds.
OtherLiabilities Liabilities. TheCityestimatesthat,asoftheendofFY2013,theCitywillhave$300millioninother liabilitiesoutstanding. AsofJune30,2012,theCityowedatleast$264.6millioninotherliabilities,consisting primarilyof: - $101.2millioninaccruedcompensatedabsences,includingunpaid,accumulated vacationandsickleavebalances; - $86.5 $86 5millioninaccruedworkers workers'compensationforwhichtheCityisselfinsured; - $63.9millioninclaimsandjudgments,includinglawsuitsandclaimsotherthan workers'compensationclaims;and - $13.0millionincapitalleasesandaccruedpollutionremediation.

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I.DetroitFacesStrongEconomicHeadwinds.
Labor Costs and Restrictive Employment Terms

TheCityisorwasapartyto48collectivebargainingagreements(CBAs)andhasmade
greatstridesundertheConsentAgreementinreducingcostsimposedbyitsnumerous activeandexpiredCBAsbetweentheCityandvariouslabororganizationsrepresenting Cityemployees, employees manyofwhichhadbeenamendedbyinterestarbitrationawardsissued byarbitratorsappointedpursuanttoPublicAct312.UndertheConsentAgreement,the CityhasunilaterallyimplementedCityEmploymentTerms("CETs"),whichwereapproved bytheFinancialAdvisoryBoard(the"FAB")appointedbytheGovernor,theTreasurer, theMayorandCityCouncilunderformerPublicAct4(nowrepealed) repealed).Currently Currently,a substantialpercentageoftheCity'semployeesarenotgovernedbycurrentCBAs,and manyareworkingunderCETtermsandconditionsofemploymentand/orthoseterms andconditionsimplementedorestablishedthroughstatutoryinterestarbitrations. Duringthelastthreeyears, years theCityhasimplementedcompensationreductionstoits workforceintheformofbudgetrequiredfurloughdays("BRF"),wagereductionsand reductionsinotherwagerelateditems,suchasvacationdays,sickdays,longevity paymentsandovertimerules.TheCityimplementedBRFsequivalentto10% ofwages (onefurloughdayeveryotherweek)tononuniformemployeesinSeptember2009. 2009 In August 2012,aspartoftheCETimplementation,BRFswereeliminatedfornonuniform employeesandreplacedwithapermanent10%wagereduction.AdditionalBRFswere implementedinFebruary2013affectingcertainnonuniformedemployees.

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I.DetroitFacesStrongEconomicHeadwinds.

TheCETsalsoimposeda10%wagereductiononDetroitPoliceOfficerAssociation
("DPOA")membersinAugust2012.DPOAchallengedtheCETsaspartofanAct312 arbitrationprocess;adecisioninthatarbitrationreducesthe10%wagereductionto5% effectiveJanuary2014. TheCETs CETs,implementedonallunionswithcontractsexpiredonorbeforeJune30, 30 2012, 2012 alsoincludedcompensationreductions,asfollows: - Freezingsickleavebanksandeliminatingreservesickleaveaccrual; - Eliminating gsicktimecashpayouts p y forfutureearnedtime; - Eliminatingtheabilitytoreinstatefurloughdays; - Eliminatingthe$3perdayallowancefordailycarusage; - Eliminatingfourtosixannualbonusvacationdays;and - Reducingvacationaccrualto160hoursfrom320hours. ThefollowingadditionalCETchangeswereimplementedonDPOAmembers: - Limitingpaidtimeforcourtiflessthantwohours; - Eliminatingeducationalreimbursement; - Requiring80hourstobeworkedinthepriorworkperiodtobeeligibleforovertime; - Changingpaymentofholidayearnings;

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I.DetroitFacesStrongEconomicHeadwinds.

- Suspendingthe2%wagedifferentialwhileonpromotionalroster; - Eliminatingtheoptiontoreceivepayforcourtandreturningtobankingthefirst
60hoursofcourttime; - Eliminatingbonusvacationdays;and - Delayingseparationpayments. UnilaterallyimplementedCETsimposednumerousconcessionsonCityemployees, includingfreezing,reducingoreliminatingactiveemployeebenefits,reducingor eliminatingpensionandretireemedicalbenefitsandreducingwagesby10%. 10% TheCETs alsonegatedseniorityprotectionsinvariousCBAsbyexpandingmanagementrights, modifyingmethodsandprocessesbywhichworkisperformed,changingshifts,hoursof operationandovertimeprocedures;andrevisingoreliminatingjobclassifications.In additiontoconcessionsimposedbytheCETs, C Ts,insomecasesandasnotedabove, concessionshavebeengrantedthroughstatutoryinterestarbitrationprocesses. Theselaborcostconcessionshavenotbeenuniformlyappliedtoallbargainingunits,and someCityemployeeshavenotbeenaffectedbythesemeasures.Therestructuringplan seekstoensurethatanyconcessionsareequitablydistributedacrossallbargainingunits (aswellasacrossunrepresentedemployees)andthattheimpactoftheseconcessionson employeesaremitigatedtotheextentpossible.

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II.KeyObjectivesforaFinancialRestructuringandRehabilitationofDetroit
Tothefullestextentpossibleunderallofthecircumstances: Provideincentives(andeliminatedisincentives)forbusinessesandresidentstolocate and/orremainintheCity. - TheCitycannotstabilizeorpaycreditorsmeaningfulrecoveriesifitcontinuesto shrink. - AchievingthisgoalrequiresimprovementsinCityservices,particularlyintheareaof publicsafetyandtaxreform,toreducethecostoflivinginthecitytomoreclosely pp costsofliving ginnearby yareas. approximate Maximizerecoveriesforcreditors. - SincetheCitywillnotgeneratesufficientcashtopayallliabilities,alternativeswill havetobeconsidered. Provideaffordablepensionandhealthinsurancebenefits,andrestructuregovernance ofpensionarrangements. Eliminateblighttoassistinstabilizingandrevitalizingneighborhoodsandcommunities withintheCity. ReformtheCitygovernmentoperationstoimproveefficiencyandreducecosts. - Inmanyareas,longertermbenefitswillrequireimmediateincreasesincapital investment. Maximizecollection ll of ftaxesand df feesthat h arel levied dorimposed. d GeneratevaluefromCityassetswhereitisappropriatetodoso.
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III.CurrentFinancialStatus
GeneralFundSummary
($ in millions) Total revenues Operating expenditures p g p Legacy expenditures Deficit (excl. financing proceeds) Financing proceeds Total surplus (deficit) Accumulated unrestricted General Fund deficit 2008 $ 1,397.7 ( (1,111.1) ) (414.6) (127.9) 75.0 $ (52.9) Fiscal year ended actual 2009 2010 2011 $ 1,363.3 $ 1,291.0 $ 1,316.8 ( (1,025.3) ) (964.7) ( ) ( (887.5) ) (462.0) (397.9) (486.1) (124.1) (71.7) (56.9) 250.0 $ (124.1) $ 178.3 $ (56.9) 2012 $ 1,196.9 ( (857.1) ) (461.6) (121.8) $ (121.8) Prelim. 2013 $ 1,121.9 ( (692.0) ) (477.3) (47.4) 137.0 $ 89.6 $ ( $ (237.0) )

$ ( $ (219.2) ) $ $ ( (331.9) ) $ $ ( (155.7) ) $ $ ( (196.6) ) $ $ ( (326.6) )

TheCityhasmadesignificantprogressdecreasingoperatingcosts;however,revenues
havedeclinedmorequicklyandlegacycostshaveincreased. Excludingproceedsfromdebtissuances issuances,theCitys City sexpenditureshaveexceeded revenuesfromFY 2008toFY2012byanaverageof$100millionannually.

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III.CurrentFinancialStatus
Revenues
($ in millions) Municipal income tax State revenue sharing Wagering taxes Sales and charges for services Property taxes Utility users' and other taxes Other Total revenues 2008 $ 276.5 249.6 180.4 191.3 155.2 73.0 271.8 $ 1,397.7 Fiscal year ended actual 2009 2010 2011 $ 240.8 $ 216.5 $ 228.3 266.6 263.6 239.3 173.0 183.3 176.9 166.7 154.1 155.0 163.7 143.0 182.7 71.5 64.8 64.8 281.0 265.6 269.8 $ 1,363.3 $ 1,291.0 $ 1,316.8 2012 $ 233.0 173.3 181.4 145.4 147.8 57.1 258.8 $ 1,196.9 Prelim. 2013 $ 238.7 182.8 173.0 120.4 134.9 54.8 217.4 $ 1,121.9

O Operating i expenditures di
($ in millions) Salaries/overtime/fringe Health benefits active Professional and contractual services Professional and contractual services Materials & supplies Utilities Other Operating expenditures 2008 $ (509.9) (49.9) (66.9) (66 9) (85.8) (35.6) (362.9) $ (1,111.1) Fiscal year ended actual 2009 2010 2011 $ (506.6) $ (466.4) $ (454.8) (54.4) (70.8) (64.6) (73.5) (73 5) (54.2) (54 2) (48.5) (48 5) (70.9) (60.1) (67.1) (38.6) (27.8) (30.1) (281.2) (285.4) (222.4) $ (1,025.3) $ (964.7) $ (887.5) 2012 $ (431.5) (54.3) (43.1) (43 1) (62.2) (27.1) (238.9) $ (857.1) Prelim. 2013 $ (357.3) (43.1) (42.7) (42 7) (63.6) (25.5) (159.8) $ (692.0)

Legacyexpenditures
($ in millions) Debt service (LTGO & UTGO) POC principal and interest POC swaps Pension contributions Health benefits retiree Legacy expenditures 2008 $ (133.8) (29.8) (45.3) (76.3) (129.3) $ (414.6) Fiscal year ended actual 2009 2010 2011 $ (177.6) $ (135.9) $ (137.3) (25.1) (28.1) (38.9) (49.9) (50.7) (50.7) (65.7) (50.8) (119.5) (143.7) (132.3) (139.7) $ (462.0) $ (397.9) $ (486.1) 2012 $ (135.6) (39.0) (50.7) (86.1) (150.1) $ (461.6) Prelim. 2013 $ (141.4) (55.4) (50.6) (78.3) (151.6) $ (477.3)

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III.CurrentFinancialStatus

Pensioncontributions. contributions - CityhasconsistentlydeferredyearendPFRS contributionsbyusingapaymentplan


financingarrangementincludingaccrualof8%interest(~$50millionforFY2012) HealthBenefits Retiree. - ThetotalcostofhealthcarebenefitsCitywideinFY2012wasapproximately $275million,ofwhichapproximately$177 millionrelatedtoretirees. - TheGeneralFundsportionofhealthcarecostsinFY2012wasapproximately $204million million,ofwhichapproximately$150 millionrelatedtoretirees retirees.

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III.CurrentFinancialStatus
In the Absence of a Comprehensive Financial Restructuring, Restructuring Budget Deficits Will Continue for the Foreseeable Future. TheCityHasLimitedOptionsforFurtherRevenueGenerationand,intheAbsenceofa ComprehensiveFinancialRestructuring,CostSavingMeasures. Legacyobligationscontinuetoincrease; Limitedornoaccesstodebtcapitalmarkets; Diminishing,ifany,returnsfromfurthertaxincreases;and Minimalpotentialforfurtherpayrollrelatedreductions. AbsentStructuralChanges,theCity'sAccumulatedDeficitisExpectedtoGrowto UnprecedentedLevels. AttheCity's City scurrentrunrate rate,itsaccumulateddeficitcouldgrowto34timesits currentlevelof$326.6 milliontoover$1.35billionbyFY 2017.

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III.CurrentFinancialStatus
ALookattheFutureintheAbsenceofRestructuringInitiatives
*Note:ThefollowingprojectionswerepreparedbasedsolelyontheCity'scurrentlevelsofoperating expensesandcapitalexpendituresanddonotaccountfor(i) increasesinexpendituresnecessaryto restoreCityservicestoadequatelevels,(ii)additionalinvestmentbytheCityinservices,assetsor i f t t or(iii)anychanges infrastructure h to t legacy l liabilities. li biliti
($ in millions) 2008 Revenues Municipal income tax State revenue sharing Wagering taxes Sales and charges for services Property taxes Utility users' and other taxes Other revenue General Fund reimbursements Transfers in (UTGO millage & nonGeneral Fund Total revenues Expenditures Salaries/overtime/fringe Health benefits active Other operating expenses Operating expenditures Net operating surplus Debt service (LTGO & UTGO) POC principal and interest POC swaps Pension contributions Health benefits retiree Legacy expenditures Deficit (excl. financing proceeds) Financing proceeds Total surplus (deficit) Accumulated unrestricted General Fund deficit $ 276.5 249.6 180.4 191.3 155.2 73.0 156.9 34.7 80.1 1,397.7 Fiscal year ended actual 2009 2010 2011 $ 240.8 266.6 173.0 166.7 163.7 71.5 142.7 55.7 82.5 1,363.3 $ 216.5 263.6 183.3 154.1 143.0 64.8 134.2 47.6 83.8 1,291.0 $ 228.3 239.3 176.9 155.0 182.7 64.8 152.4 32.3 85.1 1,316.8 2012 $ 233.0 173.3 181.4 145.4 147.8 57.1 125.5 47.6 85.8 1,196.9 2013 $ 238.7 182.8 173.0 120.4 134.9 54.8 93.4 31.2 92.8 1,121.9 Preliminary forecast 2014 2015 2016 $ 243.4 184.3 170.0 124.8 118.4 47.2 75.6 30.3 89.0 1,082.8 $ 247.3 186.1 168.3 119.4 110.2 40.9 55.8 30.3 87.9 1,046.2 $ 249.0 187.9 170.0 118.2 105.7 40.9 55.8 30.3 83.8 1,041.5 2017 $ 250.7 189.5 171.7 117.0 100.8 41.3 55.9 30.3 84.4 1,041.4 5year total $ 1,229.1 930.4 853.0 599.7 570.0 225.0 336.4 152.2 438.0 5,333.8

(509.9) (49.9) (551.2) (1,111.1) 286.7 (133.8) (29.8) (45.3) (76.3) (129.3) (414.6)

(506.6) (54.4) (464.3) (1,025.3) 338.0 (177.6) (25.1) (49.9) (65.7) (143.7) (462.0)

(466.4) (70.8) (427.5) (964.7) 326.3 (135.9) (28.1) (50.7) (50.8) (132.3) (397.9)

(454.8) (64.6) (368.2) (887.5) 429.2 (137.3) (38.9) (50.7) (119.5) (139.7) (486.1)

(431.5) (54.3) (371.3) (857.1) 339.8 (135.6) (39.0) (50.7) (86.1) (150.1) (461.6)

(357.3) (43.1) (291.6) (692.0) 429.9 (141.4) (55.4) (50.6) (78.3) (151.6) (477.3)

(341.5) (51.2) (292.9) (685.7) 397.2 (135.9) (61.0) (50.6) (199.5) (140.7) (587.6)

(341.9) (54.0) (288.2) (684.1) 362.0 (124.4) (63.2) (50.6) (233.1) (151.1) (622.4)

(346.4) (57.4) (295.9) (699.7) 341.8 (119.4) (65.4) (50.6) (258.9) (161.6) (655.9)

(352.5) (61.0) (301.5) (715.0) 326.3 (96.1) (67.6) (50.6) (285.9) (172.0) (672.3)

(1,739.7) (266.7) (1,470.2) (3,476.6) 1,857.2 (617.2) (312.6) (253.1) (1,055.8) (776.9) (3,015.6) (1,158.4) 137.0 $ (1,021.4)

(127.9) (124.1) (71.7) (56.9) (121.8) 75.0 250.0 $ (52.9) $ (124.1) $ 178.3 $ (56.9) $ (121.8)

(47.4) (190.5) (260.4) (314.1) (346.0) 137.0 $ 89.6 $ (190.5) $ (260.4) $ (314.1) $ (346.0)

$ (219.2) $ (331.9) $ (155.7) $ (196.6) $ (326.6)

$ (237.0) $ (427.5) $ (687.9) $ (1,002.0) $ (1,348.0)

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IV.TheCityHasTakenActiontoAddressItsFinancialChallenges
HeadcountReductions Since2011,theCityhasreduceditsheadcountbymorethan2,700employees(from 12,302 employeesasofcloseofFY2010toapproximately9,560asofMay31,2013). TheCity'sheadcountreductionshaveresultedinannualsavingsofover$100 million. ReductionsofLaborCoststhroughImplementationofCityEmploymentTerms("CETs") ImplementationoftheCETsprovidesforanestimated$102millioninannualsavings. RevenueGeneratingInitiatives IncreasedCorporateTaxRate.InJanuary2012,theCity'scorporateincometaxrate wasraisedto2.0%from1.0%.Thisincreasedratewasprojectedtogeneratean estimated$6 millioninadditionalannualrevenue. Enhanced nhancedTaxCollectionInitiatives.TheCityhasimplemented,andisimplementing, initiativesdesignedto(i)improvecollectionofpastduetaxesand(ii)enhance collectioneffortsonaprospectivebasis.Theseeffortstoenhancecollectionoftaxes couldgenerateanestimated$13millioninadditionalannualrevenue. IncreasedLightingRates Rates.InJanuary2013, 2013 theCity City's sPublicLightingDepartment increaseditsratestomorecloselyalignwithmarketrates/eliminatepracticeof chargingcustomerslessforpowerthantheCityitselfwaspaying.IncreasedPLDrates couldgenerateanestimated$9 millioninadditionalannualrevenue.

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IV.TheCityHasTakenActiontoAddressItsFinancialChallenges
SignificantlyReducedOperatingExpenses ReductionsinVendorCosts.TheCityisimplementinganinitiativetoreduceits vendorrelatedcostsby10%.Reductionsinvendorcostsareexpectedtosavean estimated$10 millionannually. ReductioninSubsidytoDDOT.In2012,theCityundertookstepstoimprovethe efficiencyoftheDetroitDep'tofTransportation(e.g.,throughrouterationalization), therebyreducingthesubsidyfromtheCity'sGeneralFundtotheDDOTenterprise fundbyapproximately$15 millionannually. DeferredCapitalExpenditures TheCityhasdeferredcapitalexpenditures. - Averageaggregatecapitaloutlaysforthefiscalyears2008 2012wereonly $82 98 million. $82.98 million Averageaggregatecapitaloutlaysfortheprecedingfiscalyears 2003 2007were$151.94million. - Forfiscalyears2014 2023,itisestimatedthatGeneralFundnecessarycapital expenditureswillaverageapproximately$145million. DemolitionInitiative.ProgramlaunchedinApril2010withthegoalofdemolishing 10,000vacantstructuresinthreeyears. Over5,000structureshavebeendemolished;theremainingportionofthe , structuresinthep program g arep plannedtobedemolishedby yDecember2013. 10,000

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V.RestructuringandReinvestinginCityGovernment ToaddressthecrisesconfrontingtheCityandremedythedeficienciesinservices
addressedabove(including,inparticular,deficienciesinservicesrelatingtopublicsafety), andtoachieveasustainablerestructuringthatpromotesthelongtermhealth,safetyand growthoftheCity,theCitymustaggressivelypursue anddevotesubstantialresources to theobjectivesdescribedbelow. TheCityproposestospendapproximately$1.25billionoverthenexttenyearsto,among otherthings,(i)improvetheperformanceandinfrastructureofitsPolice,Fire,EMSand TransportationDepartments,(ii)comprehensivelyaddressandremediateurbanblight, (iii)modernizeitsinformationtechnologysystemsonaCitywidebasisand(iv)address lingeringissuesplaguingtheCity'selectricalgridandlighting.

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V.RestructuringandReinvestinginCityGovernment
PublicSafety Police - Objectives - Reduceresponse p timestothenationalaverage. g - Improveclosureratesandfirstresponderinvestigations. - Updateandoverhaulpolicefleetandfacilities. - ModernizetheDepartment'sinformationtechnology. - Achievecompliancewithfederalconsentdecrees decrees. - Refinestructure,staffingandorganizationofdepartmenttobetterservecitizens; holdallmembers(swornandcivilian)ofthedepartmentaccountabletoeffectively maintaincoreresponsibilitiesofpolicing.

Fire/EMS - Objectives
- ModernizefleetandfacilitiestoensurethatDFDhasadequateandreliable

infrastructureandequipmenttoperformitsduties. - Modernizeinformationtechnology. - Improveoperatingefficiencyandcoststructure.

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V.RestructuringandReinvestinginCityGovernment
Streetlights - Objectives
- Implementcurrentpopulationbasedstreetlightfootprint. - OutsourceoperationsandmaintenancetothenewlycreatedPublicLighting

Authoritystructure(withoversightfromtheCity). - Improveservicetocitizensandbettercostmanagement. BlightRemoval. Objectives - StabilizeandrevitalizeneighborhoodsandcommunitieswithintheCityandimprove qualityoflife life. - Decreaseincidenceofcrimeandfireinblightedbuildingsandareas. - Increasepropertyvalues. - ImprovementinappearanceofCity. City

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V.RestructuringandReinvestinginCityGovernment
ElectricalTransmissionGrid Objectives - Improvementinperformanceofgridandservicestocitizens. - Decommissioningofgrid,substationsandidledpowerplant. - Increaserevenuecollectionfromcustomers. InformationSystemsUpgrades Investmentby ytheCity yinupgraded pg informationtechnology gyisanindispensable p aspect p oftherestructuringandreinvestmentproposalsandiscriticaltoachievingalmostallof theobjectivesdescribedherein. Objectives - EnhanceCitywideITinfrastructuretoassistwitheffectuatingchangeand augmentingworkflows. - IncreaseintegrationbetweenfinanceandoperationalsystemsCitywideresultingin lowerlaborcostsandimprovedefficiencies. - Improvefinancialandoperationalreporting,resultingin: - Abilitytomonitorandimproveoperatingperformance. - Moretimelyandaccuratefinancialreportingtointerestedparties. - Improved drevenueand dcollection ll efforts ff asaresult l of fstreamlined l dprocesses.
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V.RestructuringandReinvestinginCityGovernment
DetroitDepartmentofTransportation Transportation. Objectives - Reducegeneralfundsubsidythroughincreasedrevenueandreducedcosts. - DeterminebeststrategicdirectionforDDOT.

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VI.RealizationofValueofAssets TheEmergencyManagercurrentlyisevaluatingtheCity's City sassetstodeterminethemost


advantageouscourseofactiontopreserveormaximizethevalueofsuchassetsforthe longtermbenefitoftheCity.TheCitywillevaluatealloptions,includingpreservingthe statusquo,enteringintopartnershipswithotherpublicentities,outsourcingof operationsandtransferringnoncoreassetstootherprivateorpublicentitiesinsale, leaseorothertransactions. Nodecisionshavebeenmaderegardinganyparticularasset,andtheEmergency Managerwillcontinuetoevaluateoptionsforinclusioninhiscomprehensive restructuringplan. plan

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VII.TenYearProjections(GeneralFundOnly)(SteadyState)
($ in millions) 2014 Revenues Municipal income tax State revenue sharing Wagering taxes Sales and charges for services Property taxes Utility users' and other taxes Utility users and other taxes Other revenue General Fund reimbursements Transfers in (UTGO millage & nonGeneral Fund Total revenues Expenditures Salaries/overtime/fringe H l h b fi Health benefits active i Other operating expenses Operating expenditures Net operating surplus Debt service (LTGO & UTGO) POC principal and interest POC swaps POC swaps Pension contributions Health benefits retiree Legacy expenditures Deficit (excl. financing proceeds) Financing proceeds Total surplus (deficit) Accumulated unrestricted General Fund deficit Reinvestment in the City Department revenue initiatives Additional operating expenditures Capital investments Blight (excludes heavy commercial) Total reinvestment in the City Total reinvestment in the City Adjusted surplus (deficit) Adj. accumulated unrestricted General Fund deficit $ 243.4 184.3 170.0 124.8 118.4 47.2 47 2 75.6 30.3 89.0 1,082.8 (341.5) (51.2) (51 2) (292.9) (685.7) 397.2 (135.9) (61.0) (50.6) (50 6) (199.5) (140.7) (587.6) 2015 $ 247.3 186.1 168.3 119.4 110.2 40.9 40 9 55.8 30.3 87.9 1,046.2 (341.9) (54.0) (54 0) (288.2) (684.1) 362.0 (124.4) (63.2) (50.6) (50 6) (233.1) (151.1) (622.4) 2016 $ 249.0 187.9 170.0 118.2 105.7 40.9 40 9 55.8 30.3 83.8 1,041.5 (346.4) (57.4) (57 4) (295.9) (699.7) 341.8 (119.4) (65.4) (50.6) (50 6) (258.9) (161.6) (655.9) 2017 $ 250.7 189.5 171.7 117.0 100.8 41.3 41 3 55.9 30.3 84.4 1,041.4 (352.5) (61.0) (61 0) (301.5) (715.0) 326.3 (96.1) (67.6) (50.6) (50 6) (285.9) (172.0) (672.3) Preliminary forecast 2018 2019 $ 252.4 191.2 173.4 115.7 100.5 41.7 41 7 55.9 30.3 83.9 1,045.0 (358.8) (64.5) (64 5) (309.7) (733.1) 311.9 (95.0) (69.9) (50.6) (50 6) (314.7) (182.3) (712.6) $ 254.0 193.0 175.1 114.5 99.6 42.1 42 1 56.0 30.3 81.2 1,045.7 (365.1) (67 9) (67.9) (313.5) (746.5) 299.2 (92.5) (68.1) (50 6) (50.6) (321.4) (192.3) (725.0) 2020 $ 255.6 194.8 176.9 113.4 99.7 42.5 42 5 56.0 30.3 80.6 1,049.8 (371.4) (71.2) (71 2) (320.0) (762.5) 287.2 (91.8) (69.0) (49.8) (49 8) (331.5) (201.9) (744.0) 2021 $ 257.8 188.3 178.7 112.3 100.2 43.0 43 0 56.0 30.3 80.0 1,046.3 (378.4) (74.6) (74 6) (326.5) (779.5) 266.8 (91.5) (69.9) (48.9) (48 9) (337.2) (212.0) (759.5) 2022 $ 260.9 190.0 180.4 113.2 100.8 43.4 43 4 56.1 30.3 65.0 1,040.1 (386.0) (78.4) (78 4) (335.3) (799.6) 240.5 (74.8) (70.7) (48.1) (48 1) (339.5) (222.6) (755.8) 2023 $ 264.0 191.7 182.2 114.2 102.1 43.8 43 8 56.1 30.3 61.2 1,045.7 (393.7) (82.3) (82 3) (339.7) (815.7) 230.0 (70.9) (71.4) (47.4) (47 4) (343.0) (233.7) (766.4) 10year total $ 2,535.0 1,896.4 1,746.7 1,162.6 1,038.0 426.8 426 8 579.2 302.6 797.1 10,484.5 (3,635.7) (662.5) (662 5) (3,123.2) (7,421.5) 3,063.0 (992.4) (676.3) (498.0) (498 0) (2,964.8) (1,870.0) (7,001.5) (3,938.5) $ (3,938.5)

(190.5) (260.4) (314.1) (346.0) (400.7) (425.8) (456.8) (492.6) (515.3) (536.4) $ (190.5) $ (260.4) $ (314.1) $ (346.0) $ (400.7) $ (425.8) $ (456.8) $ (492.6) $ (515.3) $ (536.4) (427.5) (687.9) (1,002.0) (1,348.0) (1,748.7) (2,174.5) (2,631.3) (3,123.9) (3,639.2) (4,175.6) $ 22.9 (53.7) (107.7) (50.0) (188.5) (188 5) $ 22.1 (37.0) (74.5) (50.0) (139.3) (139 3) $ 24.4 (21.3) (38.8) (100.0) (135.7) (135 7) $ 24.2 (22.0) (51.9) (100.0) (149.7) (149 7) $ 24.5 (21.7) (33.3) (100.0) (130.5) (130 5) $ 24.7 (22.7) (30.8) (100.0) (128.8) (128 8) $ 25.0 (29.3) (28.4) (32.8) (32 8) $ 25.3 (29.3) (29.5) (33.4) (33 4) $ 25.6 (29.7) (28.5) (32.6) (32 6) $ 25.9 (30.7) (29.0) (33.8) (33 8)

$ 244.6 (297.4) (452.3) (500.0) (1,005.2) (1 005 2) $ (4,943.7)

$ (379.0) $ (399.7) $ (449.8) $ (495.6) $ (531.2) $ (554.6) $ (489.6) $ (526.1) $ (547.9) $ (570.2) (615.9) (1,015.6) (1,465.4) (1,961.0) (2,492.2) (3,046.8) (3,536.4) (4,062.5) (4,610.4) (5,180.6)

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VII.TenYearProjections(GeneralFundOnly)
RestructuringScenario.
($ in millions) 2014 Total revenues Department revenue initiatives Operating expenditures Additional operating expenditures Net operating surplus Reinvestment expenditures/adjustments Reorganization (Capital investments & Professional fees) Blight (excludes heavy commercial) DC Pension contribution (10% Police/Fire, 5% other) POC reimbursements PLD decommission Increased tax revenues Total restructuring Funds available for legacy g y liabilities Payments to secured claims (subject to review/negotiation) LTGO secured UTGO secured POC swaps (1) Notes/loans payable Total payments to secured claims Funds available for unsecured claims A Asset monetization / revenue opportunities i i / ii Funds available for unsecured claims w/opportunities Estimated unsecured claims Unsecured debt LTGO unsecured UTGO unsecured POC principal balance Notes/loans payable Subtotal: Unsecured debt Unsecured pension & OPEB OPEB liability Pension unfunded liability (PFRS) Pension unfunded liability (DGRS) Subtotal: Pension & OPEB Other unsecured items Other liabilities (FY 2012 CAFR) Other potential claims Subtotal: Other Estimated total unsecured claims $ 1,082.8 22.9 (685.7) (53.7) $ 366.4 (167.0) (50.0) (25.4) (24.1) 7.4 (259.1) 107.3 2015 $ 1,046.2 22.1 (684.1) (37.0) $ 347.2 (111.7) (50.0) (25.7) (25.4) (25.0) 12.2 (225.6) 121.6 2016 $ 1,041.5 24.4 (699.7) (21.3) $ 344.9 (38.8) (100.0) (26.2) (26.2) (25.0) 16.4 (199.8) 145.2 2017 $ 1,041.4 24.2 (715.0) (22.0) $ 328.5 (51.9) (100.0) (26.6) (26.8) (25.0) 23.8 (206.6) 122.0 Preliminary forecast 2018 2019 $ 1,045.0 24.5 (733.1) (21.7) $ 314.6 (33.3) (100.0) (27.2) (27.5) 28.3 (159.6) 155.0 $ 1,045.7 24.7 (746.5) (22.7) $ 301.2 (30.8) (100.0) (27.7) (27.1) 36.0 (149.6) 151.6 2020 $ 1,049.8 25.0 (762.5) (29.3) $ 282.9 (28.4) (28.2) (27.3) 42.0 (42.0) 240.9 2021 $ 1,046.3 25.3 (779.5) (29.3) $ 262.9 (29.5) (28.7) (27.4) 48.5 (37.1) 225.7 2022 $ 1,040.1 25.6 (799.6) (29.7) $ 236.4 (28.5) (29.3) (27.4) 56.3 (29.0) 207.4 2023 $ 1,045.7 25.9 (815.7) (30.7) $ 225.2 (29.0) (29.9) (27.4) 63.8 (22.6) 202.6 10year total $ 10,484.5 244.6 (7,421.5) (297.4) $ 3,010.2 (548.8) (500.0) (274.8) (266.7) (75.0) 334.5 (1,330.9) 1,679.3 ,

(18.7) (8.0) (50.6) (77.3) $ 30.0 tbd bd $ 30.0

(29.2) (9.8) (50.6) (89.7) $ 31.9 tbd bd $ 31.9

(29.2) (9.8) (50.6) (89.7) $ 55.5 tbd bd $ 55.5

(29.2) (9.8) (50.6) (89.7) $ 32.3 tbd bd $ 32.3

(29.2) (9.8) (50.6) (89.7) $ 65.4 tbd bd $ 65.4

(29.2) (9.8) (50.6) (89.7) $ 62.0 tbd bd $ 62.0

(29.2) (9.8) (49.8) (88.9) $ 152.1 tbd bd $ 152.1

(29.2) (9.8) (48.9) (88.0) $ 137.7 tbd bd $ 137.7

(29.2) (9.8) (48.1) (87.2) $ 120.2 tbd bd $ 120.2

(29.2) (9.8) (47.4) (86.4) $ 116.2 tbd bd $ 116.2

(281.6) (96.4) (498.0) (876.0) $ 803.3 $ 803.3

$ 161.0 369.1 1,428.8 33.6 1,992.5 5,718.3 1,437.0 2,037.0 9,192.3 264.6 tbd 264.6 $ 11,449.4

Footnote: (1) Assumes continued payments as scheduled. Treatment to be determined.

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VII.TenYearProjections(GeneralFundOnly)
ConclusionsBasedUponProjections TheCityacknowledgesthatitmustexertreasonableeffortstomaximizerecoveriesfor allcreditors. Asdemonstratedbythe10yearprojections,however,theCity'sexpectedrevenueswill fallsignificantlyshortofthelevelsrequiredtofundtheCitysoperationsandfullysatisfy itsliabilities. GiventheCity's(i)substantialdebtlevels(LTGO;UTGO;COPs;Swaps),(ii)significant (iii) )continuing goperating p gexpenses, p sharedsacrificewillbe laborrelatedliabilitiesand( requiredfromallstakeholderstoachievetheCity'sdual(andcomplementary)goalsof maximizingreturnsforitsstakeholderconstituencieswhilesimultaneouslyestablishing theframeworkforahealthyandgrowingDetroitmovingforward. AlloftheCity's City sstakeholderscanbenefitfromarestructuredandrevitali revitalized edDetroit. etroit.

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VIII.RestructuringProposal
SummaryofTreatmentofDebt SecuredDebt - DWSDDebt. TheexistingDWSDwaterandsewerbonddebtmaybedividedinto twoclasses,ifapplicable: - DWSDClassADebtClaims - DWSDClassADebtClaimsshallconsistofclaimsunderorevidencedbycertain debtthatmaybepaidpriortotheeffectivedateoftheCityscomprehensive restructuringplanwithoutincurringamaterialpremiumorpenalty. - OntheeffectivedateoftheCityscomprehensiverestructuringplan,accrued principalandinterestforDWSDClassADebtClaimsaccruedthroughthe restructuringplan'seffectivedatewilleither(i) berepaidinfullincashor (ii) receivesuchtreatmentasmaybeagreeduponbytheparties parties.

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VIII.RestructuringProposal
- Sourceoffundsforrepayment:Newlongtermbondissuanceswitha

newlyformedMetropolitanAreaWaterandSewerAuthority,or"MAWSA," astheissuer. i. NewSeriesABondPrincipal:Anamountequaltothesumoftheprincipalof theoutstandingdebtthatwasissuedtoredeemtheDWSDClassADebt Bondsplusinterestthereonaccruedthroughtherestructuringplans effectivedateandfeesincurredinconnectionwiththenewfinancings. ii. NewSeriesABondCollateral:LienonnetrevenuesgeneratedbyMAWSA assets t with ithth thesamepriorities i iti asthe th DWSDClass Cl ADebt, D bt b but tsubordinate b di t t to theoperatingandmaintenancecostsofthesystem,includingtheTransaction Payment. iii. NewSeriesABondInterestRate:Prevailingmarketrateforsimilarlongterm municipal i i lbonds b d atthe h time i of fissuance. i iv. NewSeriesABondMaturities:Thevariousseriesofnewmunicipalbonds wouldhavelongtermmaturitiesdeterminedatthetimeofissuanceonthe basisofthenexistingmarketconditions. - DWSDClassBDebtClaims. - DWSDClassBDebtClaimsshallconsistofallclaimsunderorevidencedbyeach seriesofexistingwaterorsewerbonddebt(whethercallableornot)thatarenot DWSDClassADebtClaims.

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VIII.RestructuringProposal
i OntheeffectivedateoftheCity i. Citys scomprehensiverestructuringplan plan,holders

ofDWSD ClassBDebtClaimsshallreceiveSeriesBRestructuredBondsor suchtreatmentasmaybeagreeduponbytheparties. - SeriesBRestructuredBondTerms:SeriesBRestructuredBondswouldbeissued b MAWSA toholders by h ld of foutstanding d DWSD Class l BDebt b Claims. l i. SeriesBRestructuredBondPrincipal:ForeachseriesofSeriesB RestructuredBonds,anamountequaltothesumoftheprincipalofthe outstandingDWSDClassBDebtBondsforwhichsuchSeriesBRestructured Bondsaretobeexchangedplusinterestthereonaccruedthroughthe restructuringplanEffectiveDate. ii. SeriesBRestructuredBondCollateral:Lienonnetrevenuesgeneratedby prioritiesascurrently yexistfortheDWSDClassB MAWSAassetsinthesamep DebtBondsforwhichsuchSeriesBRestructuredBondsaretobeexchanged, subordinatetotheoperatingandmaintenancecostsofthesystem,including theTransactionPayment. iii. SeriesBRestructuredBond ondInterestRate:Prevailingmarketrateforsimilar longtermmunicipalbondsatthetimeofissuance. iv. SeriesBRestructuredBondMaturities:Thesamematuritydatesasthe DWSDClassBDebtBondsforwhichtheSeriesBRestructuredBondswillbe exchanged exchanged.

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VIII.RestructuringProposal
- SecuredGeneralObligationDebt
- TherearesixseriesofsecuredGeneralObligationDebt: - $100,000,000originalprincipalamountDistributableStateAidSecondLien

Bonds(UnlimitedTaxGeneralObligation),Series2010(A)(TaxableRecovery ZoneEconomicDevelopment l Bonds d DirectPayment). ) - $249,790,000originalprincipalamountDistributableStateAidGeneral ObligationLimitedTaxBonds,Series2010. - $38,865,000originalprincipalamountSelfInsuranceDistributableStateAid ThirdLienBonds(LimitedTaxGeneralObligation),Series2012(A)(2). - $30,730,000originalprincipalamountSelfInsuranceDistributableStateAid ThirdLienRefundingBonds(LimitedTaxGeneralObligation),Series2012(B2). - $6,405,000originalprincipalamountGeneralObligationDistributableState AidThirdLienCapitalImprovementRefundingBonds(LimitedTaxGeneral Obligation),Series2012(B). - $53,520,000originalprincipalamountSelfInsuranceDistributableStateAid ThirdLienBonds(LimitedTaxGeneralObligation),Series2012(A2B). - Totalannualdebtserviceisapproximately$39millionperyearfromFY 2015 throughFY 2033. - Treatment:Subjecttonegotiationwithholders.

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VIII.RestructuringProposal
- SecuredClaimsArisinginConnectionwithInstallmentNotesPayable
- TheCityhas$87.8millionoutstandinginconnectionwithnotespayablerelatedto

variouspublicimprovementprojects,whichnoteswereissuedinconnectionwith the"Section108"HUDLoanGuaranteeProgramandaresecuredbyfuture"Block Grant"revenues revenues. - Treatment:Subjecttonegotiationwithholders. - SecuredClaimsArisingunderServiceAgreementsRelatedtoCOPRelatedInterest RateSwaps p - Treatment:Subjecttonegotiationwithholders. - SecuredAutomobileParkingFundClaims - $9.3millioninoutstandingprincipalamountofDetroitBuildingAuthorityRevenue RefundingBonds:ParkingSystem,Series1998Aaresecuredbyapledgeofall revenuesoftheparkingsystem,netofoperatingexpenses. - Treatment:Principalandinterestaccruedthroughtheeffectivedatewillbepaid infullincashusingproceedsofsalesofCity'sparkingrelatedassets.Intheevent thatsalesarenotnegotiatedandconsummatedpriortotheeffectivedate,claims willbesubjecttonegotiationswithholders.

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VIII.RestructuringProposal
ConsiderationforUnsecuredClaims:Holdersofgeneralunsecuredclaimswillreceive
limitedrecourseparticipationnotes(the"Notes"). - ClaimsUnderUnsecuredGeneralObligationBonds/Notes. - Aggregateamount:Approximately$650million. - Treatment:Exchangedforaprorata(relativetoallunsecuredclaims)principal amountofnewNotes. - ClaimsofServiceCorporations(oraffiliatedtrusts)onAccountofCOPs. - Aggregate A amount:A Approximately i l $1 $1.4 4billi billion. - Treatment:Exchangedforaprorata(relativetoallunsecuredclaims)principal amountofnewNotes. - ClaimsforUnfundedOP OPEBLiabilities. iabilities. - Currentretireeswillreceivemodifiedmedicalbenefitsplansutilizingeitherthe exchangestobecreatedbyJanuary1,2014underthePatientProtectionand AffordableCareActorMedicare,asapplicable.Theproposedreplacement programispreliminarilyestimatedtohaveacosttotheCityofbetween $27.5millionand$40millionannuallydependingonchoicestobemade. - Claimswillresultfromthemodificationofbenefits.Theamountofsuchclaimshas notbeenfinallydetermined. - Treatmentfor f Allowed ll dClaims: l Exchanged h dfor f aprorata(relative ( l toall llunsecured d claims)principalamountofnewNotes.
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VIII.RestructuringProposal
- ClaimsforUnfundedPensionLiabilities Liabilities.
- Assetforthabove,preliminaryanalysisindicatesthattheunderfundingintheGRS

andthePFRSisapproximately$3.5 billion.Atthislevelofunderfunding,theCity wouldhavetocontributeapproximately$200million $350millionannuallyto fullyfundcurrentlyaccrued, accrued vestedbenefits. benefits Suchcontributionswillnotbemade undertheplan. - Claimsfortheunderfundingwillbeexchangedforaprorata(relativetoall unsecuredclaims)principalamountofnewNotes. - Becausetheamountsrealizedontheunderfundingclaimswillbesubstantiallyless thantheunderfundingamount,theremustbesignificant cutsinaccrued,vested pensionamountsforbothactiveandcurrentlyretired persons. - ClaimsonaccountofOtherLiabilities. iabilities. - AggregateAmount:Approximately$300million. - Treatment:Exchangedforaprorata(relativetoallunsecuredclaims)principal amountofnewNotes.

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VIII.RestructuringProposal
DescriptionofLimitedRecourseParticipationNotes. Notes - RelevantDefinitions:
- AdjustedBaseCoveredRevenuesmeansforaFiscalYearfollowingtheInitial

RevenueParticipationYear,BaseCoveredRevenuesadjustedforinflationforthe periodbeginningonthefirstdayoftheInitialRevenueParticipationYearand endingonthefirstdayoftheFiscalYearusingthepositivechange,ifany,inthe ConsumerPriceIndexduringsuchperiod. - BaseCoveredRevenuesmeansonehalfofthesumofCoveredRevenuesforthe firsttwoFiscalYearsbeginningaftertheEffectiveDate. - CoveredRevenuesmeansamountsactuallycollectedbytheCitysGeneralFund inaFiscalYearonaccountof(a)PropertyTaxes,IncomeTaxesandGamingTaxes leviedforsuchFiscalYearand(b)RevenueSharingPayments,determinedbased upontheCity'sauditedfinancialstatements. - DutchAuctionmeansamethodforpricingtheNoteswherebythepriceofthe NotesofferedbytheCityisthelowestprice(theAuctionPrice)atwhichthere arebidstosellNotesforanaggregatepurchasepriceequaltotheamounttheCity isrequiredtopayinrespectofRevenueParticipationPaymentsand/orAsset DispositionProceedsthendueandpayable.Duringbidding,eachNoteholderwill indicatehowmanyNotesitiswillingtoselltotheCityandthepricesuch gtoaccept. p AllNotesofferedattheAuctionPriceoratalower Noteholderiswilling pricewillbesoldtotheCityattheAuctionPrice.
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VIII.RestructuringProposal
- Effective EffectiveDate Datemeanstheclosingdateofacomprehensiverestructuringofthe

CitysfinancesonwhichtheNotesshallbeissued. - FinalParticipationYearmeanstheFiscalYearbeginningonthe20thanniversaryof thefirstdayoftheInitialParticipationYear. - FiscalYearmeansaperiodcommencingonJuly1ofayearandendingonJune30 ofthefollowingyear.Forgreatercertainty,theFiscalYearbeginningonJuly1,2014 andendingonJune30,2015isthe2015FiscalYear. - InitialParticipation p YearmeansthesecondfullFiscalYearfollowing gtheEffective Date. - TrusteemeansanindenturetrusteeorotheragentfortheNoteholdersasdefined indefinitivedocumentationfortheNotes. - Terms: - InitialPrincipalAmount:$2,000,000,000.00. - InterestRate:1.5%perannumontheoutstandingprincipalamountoftheNotes, payablesemiannually.Nointerestshallbepaidoraccruedforanyperiodfollowing theendoftheFinalParticipationYear. - MaturityDate:ThefirstSeptember30followingtheFinalParticipationYear.The CityshallhavenoobligationtopayanyamountsotherthantheRevenue p Payment y inrespect p oftheFinalParticipation p Yearonthematurity ydate. Participation TheNotesmaybeprepaidinwholeorinpartatanytimewithoutpremiumor penalty.
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VIII.RestructuringProposal
- OntheSeptember30aftertheendofeachFiscalYearbeginningwiththeInitial

ParticipationYear,anamountequaltotheproductof(a)30%(0.30),multiplied by(b)(i)theamountbywhichCoveredRevenuesforsuchFiscalYearexceed (ii)AdjustedBaseCoveredRevenuesshallbeappliedtoreducetheprincipal amountoftheNotes.NoRevenueParticipationPaymentsshallbemadeforany FiscalYearaftertheFinalParticipationYear. - GrantsandOtherAmountsReceivedtoOffsetCostsofAddressingBlight:Ifthe CityreceivesanycashgrantsorothercashpaymentsaftertheEffectiveDateand beforetheMaturityDatefromtheStateofMichigan Michigan,theFederalgovernment, government or anyothergovernmentornonprofitentitynotaffiliatedinanywaywiththeCityfor thepurposeoffundingprogramsoractivitiestoaddressblightthatareincludedin the10YearPlan("BlightRevenues")andthatcanbeutilizedinplaceofthe GeneralFundsumsinthe10 0YearPlanprojections,anamountequalto75%ofthe GeneralFundrevenuesthatwouldotherwisebespentonblightbutfortheoutside fundsshallbeappliedtoreducetheprincipalamountoftheNotes. - AssetDispositionProceeds:IftheCityreceivescashconsiderationinconnection withthetransferofSpecifiedAssetsaftertheEffectiveDateandbeforethe MaturityDate,anamountequalto75%ofsuchcashshallbeappliedtoreducethe principalamountoftheNotes.Forgreatercertainty,theassumptionof indebtednessshallnotconstitutecashconsideration. - TheCityshallmakedistributionsofBlightRevenuesandAssetDispositionProceeds whentheamountofsuchpaymentsthataredueequalorexceed$50millionorat thetimeaRevenueParticipationPaymentisdue,whicheverissooner.
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VIII.RestructuringProposal
- DutchAuctions: AnyRevenueParticipationPayment Payment,BlightRevenues Revenues,Asset
DispositionProceedsandotheramountsmadeavailablebytheCitymaybeusedto fundofferstopurchaseNotesthroughaDutchAuctionprocess.TheCityshallgive noticeofitsintenttoconductsuchaDutchAuctionusingaRevenueParticipation PaymentonorbeforetheJuly15thfollowingtheendofthepertinentFiscalYear andshallconcludetheauctionandpurchasenotesofferedandacceptedinthe auctionnolaterthanthe90daysfollowingthedatesuchnoticeisgiven.TheCity shallgivenoticeofitsintenttoconductsuchaDutchAuctionusingAssetDisposition g Revenuesonorbeforethe30days y following gthedatewhenthe ProceedsorBlight CitybecomesobligatedtoapplyAssetDispositionProceedsandshallconcludethe auctionandpurchasenotesofferedandacceptedintheauctionnolaterthan 90daysfollowingthedatesuchnoticeisgiven.TheCitymaygivenoticeofitsintent toconductaDutchAuctionusingfundsprovidedbytheCitywhicharenot otherwiserequiredtobeappliedtorepaymentoftheNotesatanytime. - LimitedRecourse:TheCitysobligationtopayinterestontheNotesshallbea generalobligationoftheCity.TheCityshallhavenoobligationtopaytheprincipal amountoftheNotesexcepttotheextentthatRevenueParticipationPayments, BlightRevenuesorAssetDispositionProceedsbecomedueinaccordancewiththe termshereof. - RequirementsofLaw.ThetermsoftheNotesmayberevisedtoconformwith q oflaw. requirements

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IX.CalendarandContacts
Requestsforadditionalinformation:June17 17,2013 June24, 24 2013. 2013 Initialroundofdiscussionswithstakeholders:June17,2013July12,2013. Evaluation:July15,2013 July19,2013.

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IX.CalendarandContacts
Contacts: - MILLERBUCKFIRE &CO.,LLC
601LexingtonAvenue,22ndFloor NewYork,NY10022 (212)8951800 - KennethBuckfire CoPresident&ManagingDirector. - JamesDoak ManagingDirector.

- JONESDAY
DavidG. G Heiman, Heiman Esq. Esq 901LakesideAvenue NorthPoint Cleveland,Ohio441141190 (216)5863939
Bruce Bennett, Bennett Esq. Esq 555 South Flower Street, 50th Floor Los Angeles, CA 90071 (213) 489-3939 Heather Lennox, Lennox Esq Esq. 222 East 41st Street New York, NY 10017 (212) 326-3939

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