The association voted on the measure at its annual meeting
in Chicago. The AMA noted that obesity rates in the United
States have “doubled among adults in the last twenty years and
tripled among children in a single generation” and that the
World Health Organization, the U.S. Food and Drug Administration
and Internal Revenue Service already recognize the condition as
a disease.

According to “F as in Fat: How Obesity Threatens America’s
Future 2012,” a study released by the Robert Wood Johnson
Foundation in September last year, adult obesity rates in 2011
exceeded 30 percent in 12 U.S. states. The study projected that
“if rates continue to increase at the current pace, adult
obesity rates could exceed 60 percent in 13 states, and all
states could have rates above 44 percent by 2030.”

Obesity is associated with a variety of diseases, including
type 2 diabetes, cardiovascular disease and some cancers. Rising
obesity is expected to increase America’s already high health
care costs.

The AMA’s recommendations accompanying the vote included
urging physicians and insurance companies to “recognize obesity
as a complex disorder,” encouraging national efforts to educate
the public “about the health risks of being overweight and
obese.”

The AMA also recommended the creation “National Obesity
Awareness Month” to highlight the benefits of exercise and to
warn of the risks of obesity.

(Reporting By Nick Carey. Editing by Andre Grenon)

(Reuters) – Now that Detroit’s emergency manager has laid out a tough road that could include a bankruptcy filing for the city, the bondholders, pension managers and others with a stake in the outcome are left to assess his next steps while seeking to minimize any possible losses.

Kevyn Orr faces a difficult task, for he must either coerce the financially troubled city’s creditors into cutting a deal that would leave many with just pennies on the dollar, or file for Chapter 9 bankruptcy, where his powers would be greater but the likelihood of long, costly litigation far higher.

Rather than a corporate setting, the city’s emergency manager is acting in a political realm where the interests of Detroit’s citizens and even credit ratings throughout the state of Michigan may hang in the balance.

There was a forceful start to negotiations with debtholders at a Detroit hotel on Friday, with the city represented by Orr saying it would stop making payments on some of its $18.5 billion in debt, which would put it in default.

Orr also presented a proposal on Friday to creditors, bondholders, pension funds and union representatives, laying out his case for concessions from them in a plan that ran to 134 pages.

Orr told reporters on Friday there was a 50/50 chance of bankruptcy for Detroit, which would be a first for a major U.S. city. At the same time, he insisted this was “not a jaded effort just to go through the process to get to a bankruptcy filing.”

The emergency manager’s proposal went to great lengths to detail the city’s financial ruin, declaring in a stark subheader: “THE CITY IS INSOLVENT” and cataloguing Detroit’s disastrous record of keeping its citizens safe and its streetlights on.

Detroit, the center of the U.S. auto industry, is the poorest large city in the country, with more than a third of its residents living below the official government poverty line.

At a minimum, Orr’s opening move could be seen as part of a checklist he needs to tick off in order to meet legal requirements needed to declare a bankruptcy of America’s most troubled metropolis. But some restructuring experts see in Orr’s approach an attempt to put together a pre-packaged bankruptcy, a strategy that has been adopted for Chapter 11 bankruptcies in the corporate world but never before used for a municipality seeking Chapter 9 bankruptcy protection.

“Kevyn Orr is a bankruptcy lawyer and he’s going down a checklist of the things he needs to do,” said Michael Sweet, an attorney at Fox Rothschild who helped the city of Richmond, California, restructure its finances to avoid bankruptcy. “He’s keeping all the options on the table.”

A pre-packaged bankruptcy occurs when an entity has negotiated a deal with creditors and other interested parties in advance, put it into written form and received enough votes from creditors to get a judge’s approval – forcing it on objecting creditors. Pre-packaged plans greatly reduce uncertainty and legal fees.

Without a pre-packaged plan, Chapter 9 proceedings for the city of 700,000 could be lengthy, litigious and expensive, and cash-strapped Detroit would have to foot the bill. Proving insolvency and demonstrating a municipality’s inability to pay its bills would be critical to filing for Chapter 9.

“He (Orr) will get a pre-packaged plan,” said James McTevia of Michigan-based consulting firm McTevia & Associates. “But it will be contentious and it will cost a lot.”

“Ultimately, given the size of Detroit, the scale of its problems and the number of issues involved, this could go all the way to the Supreme Court.”

PRESSURE POINTS

Unlike many lawyers in the consensus-building world of bankruptcy, Orr earned his keep as a litigator and he led automaker Chrysler’s fight in 2009 to get approval to close a quarter of its dealerships early in its bankruptcy. The Chrysler experience was a factor when Michigan Republican Governor Rick Snyder tapped Orr in March to fix Detroit’s finances.

Those who have worked with Orr said he knew how to zero in on an adversary’s pressure points and narrow their options. They cited his decision to make one presentation to all creditors on Friday.

“If you want to do it right, you get all creditors in the same room and you tell the story one time so there’s no misunderstanding,” said Pat O’Keefe, president of O’Keefe and Associates, a turnaround firm based in the Detroit suburbs.

O’Keefe added he expected Orr “will try to get some pre-negotiation done with creditors, then use Chapter 9 to implement his plan.” He noted that Orr’s warning on Friday to reporters that Detroit should know “within the next 30 days or so” if it can avoid bankruptcy could serve as one more proof of “good faith” if he does file for Chapter 9.

Pre-packaged bankruptcy using Chapter 11 was pioneered by Jay Goffman of law firm Skadden, Arps, Slate, Meagher & Flom in New York. He said it could work for municipalities.

“Whether it is a city or state or county, there’s no reason that you can’t get smart people together, figure out the right solutions from a business standpoint and essentially prepack the solution,” Goffman said.

But getting everyone on board for a pre-packaged plan is easier said than done, said Douglas Bernstein, a bankruptcy attorney at Plunkett Cooney in the Detroit area.

“When it comes to a pre-packaged plan, the big question is whether he (Orr) would have enough acceptance going into court,” he said. “He would need sufficient votes from all the creditor classes and that will not be easy.”

One problem is that Detroit’s creditors or stakeholders have different priorities. The main areas of uncertainty surround its unions and pension funds, which may not have much bargaining room and may feel their best chance lies in bankruptcy proceedings rather than a negotiated pre-packaged deal.

“It’s quite possible that we will see infighting between Detroit’s creditors,” said John Pottow, a University of Michigan law professor who specializes in bankruptcy.

‘POWERFUL’ TOOL

Orr has options available to him that can give him leverage over the competing groups. If he goes to bankruptcy court as the sole representative of Detroit, experts say he would have more options and power, which he alluded to publicly last week.

“I have a very powerful statute,” Orr said Monday. “I have an even more powerful Chapter 9. I don’t want to use it, but I am going to accomplish this job. That will happen.”

Orr would be able to drag recalcitrant creditors into court. While no one can force Detroit to sell assets involuntarily in bankruptcy, he can sell them voluntarily.

Much has also been made of a clause in Michigan’s constitution that specifically protects pensions and retirement benefits, and it is unclear how that provision would be treated in a federal bankruptcy.

Fox Rothschild’s Sweet said a judge would have to “determine whether the 10th Amendment (of the U.S. Constitution) trumps the notion that federal law is supreme.” The amendment states that powers not delegated to the federal government by the Constitution or prohibited to the states are reserved for the states or the people.

“The last thing (union pension funds) may want is for a judge to rule on that,” he said. “Because if the judge ruled against them, it would open the floodgates” for similar cases.

Time is also of the essence, as Detroit’s default could hurt Michigan along with other municipalities in the state and make them “suffer higher interest costs and more difficulty borrowing,” Richard Larkin, senior vice president at investment firm HJ Sims, wrote in a note on Friday.

The longer a deal takes, the more likely Chapter 9 becomes, the University of Michigan’s Pottow said, as that will be an indication of how much resistance Orr faces from stakeholders.

“My heart says that Kevyn Orr will be able to get everyone around a table and hammer out a deal,” Pottow said. “But my brain says that he is going to have no choice but to file” for Chapter 9.

(Additional reporting by Karen Pierog, Bernie Woodall, Steve Neavling and Deepa Seetharaman; Editing by David Greising, Mary Milliken and Peter Cooney)

“We were doing real well considering, but inventory was a
problem,” said Ward, 40, who perfected his ribs while at college
in Alabama and opened Slabbee’s five months ago in Brightmoor.

But with advice from SWOT City, a pilot program run by
foundation-backed small-business incubator TechTown Detroit,
Ward has received microfinancing to solve his inventory problem.
Now he plans to buy a delivery van and hire a second employee.

Ward’s rib joint is just one example of new ways in which
Detroit’s philanthropic foundations are trying to create jobs
and boost schools in a city facing potential bankruptcy. In
doing so, they are conducting a sort of civic triage, choosing
areas, schools and businesses with a good chance of survival.

The foundations’ efforts address the breakdown of civic life
that Detroit’s emergency manager, Kevyn Orr, pointed out earlier
this month in his first report on Detroit’s financial health.

Detroit’s foundations hark back to an era when the city was
an economic beacon and the auto industry’s birthplace. The
Kresge Foundation, for example, was started in 1924 with money
from the founder of what eventually became retail giant Kmart.

Some other initiatives in Detroit are paying off. The city’s
downtown is experiencing a small boom thanks largely to mortgage
lender Quicken Loans, whose co-founder and Detroit native Dan
Gilbert has moved in 7,000 employees and invested $1 billion in
an attempt to attract other businesses.

But most of Detroit’s 80 percent black population of around
700,000 live outside downtown, many in blighted areas.

“Downtown is critical, but there are a whole host of
problems out in the neighborhoods that need to be dealt with,”
said Leslie Smith, CEO of TechTown Detroit, whose SWOT City
pilot has led to one new small business with six more planned.

These efforts to design strategy and measure results mirror
a broader shift in the charitable world, said Michael Moody of
the Johnson Center for Philanthropy at Grand Valley State
University. In the past, foundations were satisfied giving away
food and clothing. “The history of philanthropy, especially in
the Depression, has shown that doesn’t work,” Moody said.

The Detroit-based Skillman Foundation has focused on schools
in six neighborhoods and seen graduation rates rise 14 percent
from 2007 to 2012 in four of them, compared to a 1 percent rise
citywide. The New Economy Initiative, which has committed $100
million to promote entrepreneurs in Detroit, says it has
measured the results so far: It has helped 423 small firms and
contributed to the creation of more than 7,000 jobs.

Local foundations have been criticized in the past for
throwing their weight around, but Moody said they have become
more collaborative and responsive as a result.

SAFETY ISSUES UNDERMINE PROGRESS

Detroit native Adriana Alvarez left her post-college job in
Hawaii in 2010 to return to work for non-profit Congress of
Communities, which focuses on Southwest Detroit, a neighborhood
that has attracted many Hispanic immigrants in recent decades.

“If I don’t give back, then others won’t get a chance to
learn what I have,” said Alvarez, 24.

Her group has become a conduit for other local non-profits,
with projects to help children avoid joining gangs through youth
groups and sports, and patrolling streets to prevent crime.

Congress of Communities is one of six neighborhood groups
the Skillman Foundation has invested in. Dedicated to helping
Detroit’s children and founded by the widow of an early
executive at 3M Co who settled in the Detroit area, Skillman
selected these areas for their high concentrations of children.

Skillman used to give millions of dollars annually to
Detroit’s ailing public school system, but found the results
unsatisfactory. It chose instead to back individual schools. In
order to help the communities around these schools, Skillman has
funded community groups of local activists.

“The question was how do we reinvent the social contract in
Detroit?” said Chris Uhl, a former banker and now vice president
of social innovation. Since 2007, Skillman has issued $124
million to its six target areas.

Tonya Allen, due to become Skillman’s next president,
estimates the grants the foundation has made have leveraged an
additional $450 million in grants from other groups since 2007.

Skillman’s approach is mirrored by General Motors Co,
which like Detroit’s other automakers has joined efforts to help
the city. GM has committed $27.1 million over five years to a
United Way program to raise graduation rates at seven city
schools to 80 percent from 50 percent.

The Kresge Foundation has focused on boosting the economy
along Woodward Avenue, a major city thoroughfare. It has kicked
in $35 million toward a $137 million, 3.5-mile (5.6-km) light
rail line along Woodward, along with private companies like
Quicken Loans and truck rental firm Penske. These private
contributions – as well as the U.S. government’s $25 million
stake – will count toward further extensions of the line, said
Kresge’s senior director for community development Laura
Trudeau.

“Our influence is limited but we try to leverage it to have
a greater impact,” said Trudeau.

Kresge also has committed $150 million over the next five
years toward Detroit Future City, a citywide planning blueprint.

Foundations here say when they fund projects, others follow
suit. New Economy Initiative Executive Director David Egner said
the group has committed $7 million since 2010 to entrepreneurial
seed fund Invest Detroit and attracting “tens of millions” more.

NEI, a joint effort by 10 foundations, eight of them based
in southeast Michigan, now claims it has $110 million in total,
a combination of investable funds and tax credits for business
expansion. It is planning a second, $60 million round of
fundraising to continue supporting Detroit-area entrepreneurs.

Foundation leaders say the biggest hurdle to success today
is endemic violence and crime in some areas. Detroit’s murder
rate in 2012 was 10 times the U.S. average. Seemingly mundane
facts of street life – broken street lights and inoperable fire
hydrants – compound the city’s problems.

“If the lights don’t work and the streets aren’t safe,
people won’t come here,” said NEI’s Egner.

Bill Nowling, spokesman for Kevyn Orr, acknowledges public
safety is a “paramount concern.”

“The region’s philanthropic community is fully committed to
Detroit’s turnaround, but we cannot let its effort be for
naught,” Nowling said.

Skillman’s Uhl says lack of safety undermines progress. One
telling example: True Whitsey was a graduate of Frederick
Douglas Academy, a Skillman-funded school, and went on to study
at Ferris State University. But when he returned home for
Christmas break last year, he was shot and killed while being
robbed at gunpoint in the street.

“Our work is meaningless if we can’t keep these kids safe,”
Uhl said. “If they don’t fix that it doesn’t mean a damn thing.”

(Additional reporting by Bernie Woodall; Editing by Mary
Milliken and Lisa Shumaker)

(Reuters) – For Kevin Kookogey, the Internal Revenue Service’s scrutiny of his one-man outfit providing conservative mentoring for students was so onerous he thought it was trying to deter him from political activity.

“It worked,” said the Tennessean who ran the group Linchpins of Liberty. “I completely shut down and do my mentoring without fundraising so I can avoid getting audited.”

Kookogey is one of many conservatives who complain about unfair treatment at the hands of the IRS, the U.S. tax service that admitted last Friday it had inappropriately singled out the Tea Party movement and other conservative groups for extra examination.

On Tuesday, a government watchdog sharply criticized the IRS for its targeting of conservative groups and warned that the agency’s actions gave the appearance that it was not politically impartial.

As the political scandal grew, Attorney General Eric Holder promised on Tuesday to investigate the agency and President Barack Obama called the watchdog report’s findings “intolerable and inexcusable.” Both Democrats and Republicans on Capitol Hill have called for investigations.

Conservative leaders and their lawyers say many of those ensnared were small groups, ill-equipped to handle the intense questioning and document demands that came as they sought tax-exempt status.

“What has got lost in all the news about the IRS targeting conservative groups is that these aren’t the big fish like FreedomWorks, Tea Party Patriots or Americans for Prosperity,” said Dawn Wildman, president of SoCal Tax Revolt Coalition Inc, a conservative group in Southern California, in reference to some of the largest such groups.

Wildman says she dropped her group’s application for tax-exempt status because of IRS push back. “These are just small, largely self-funded, mom and pop Tea Party groups that lack resources to fight back,” she added.

The conservative American Center for Law and Justice, which provided legal aid to 27 targeted groups, said the intense scrutiny placed a hardship on its clients, whose average fundraising is around $3,000 to $4,000 a year.

“The IRS knew from the applications the size of the group and picked on the small ones figuring they wouldn’t put up a fight,” chief counsel Jay Sekulow said. “Most of the big guys got a pass.”

The IRS declined to comment on which groups it targeted or on any individual cases.

QUESTIONS ‘IMPOSSIBLE TO ANSWER’

Ginny Rapini, a Tea Party leader from Northern California, said her personal IRS travails were highlighted in a U.S. House floor speech last year by Republican Representative Tom McClintock, who accused the agency of harassing Tea Party groups and subjecting one unnamed leader to a personal audit.

The IRS denied at the time that it had targeted conservative groups for special attention, an assertion that has proven to be an embarrassment for the Obama administration in recent days.

While embroiled in a lengthy dispute with the IRS over her group’s tax-exempt application, Rapini said the IRS office in Ogden, Utah, audited her and alerted California tax authorities that she and her husband had neglected to pay $20,000 in taxes. They were billed $43,000 with penalties and fees.

Rapini alleges that the personal audit and her group’s application were connected. She intends to pay the taxes, which she blamed on an accounting error and are owed to the state, but is still fighting the fees. The IRS declined to comment.

Groups whose leaders were interviewed by Reuters described inquiries which they regarded as excessive and costly, with multiple requests for information, donor lists and political affiliations.

Toby Marie Walker, a leader of the Waco Tea Party in Texas, said her group raised only about $5,000 last year and had to seek free legal assistance to deal with the IRS.

Walker said some questions – such as one asking if she had personal relationships with political figures – were “entirely subjective and almost impossible to answer.” The letter made clear there would be penalties for incorrect answers.

“My state representative (Texas House member Charles “Doc” Anderson) is also my veterinarian,” she said. “He neutered my dogs, so does that qualify as a close relationship?”

Common questions included asking whether any group members have “run or will run for office in the near future.”

Todd Maynes, a tax partner at the Chicago office of law firm Kirkland & Ellis, described the IRS’s questions as “very unusual” from an organization he usually regards as “fair and efficient.”

“This is not the IRS I’ve come to know,” he said.

Rapini said she endured two rounds of IRS queries after seeking tax-exempt status for the NorCal Tea Party, which raised $100,000 in 2012. The second letter gave her 15 days to answer 19 questions and multiple sub-questions.

She boxed up newsletters, meeting minutes, even a pocket U.S. Constitution and paid $100 to send it to the IRS.

She said the IRS reviewed her returns and alerted California authorities to discrepancies in her filings. “It doesn’t pass the smell test for me,” she said.

Three weeks after McClintock mentioned her case on the House floor, Rapini said the IRS approved her group’s application.

(Reporting by Nick Carey in Chicago; Additional reporting by David Lawder in Washington; Editing by Marilyn W. Thompson, Mary Milliken and Eric Beech)

(Reuters) – Michigan’s biggest city is “clearly insolvent” and needs to restructure its debt and renegotiate its labor contracts to address its problems, Detroit’s emergency financial manager said on Monday.

Emergency Financial Manager Kevyn Orr in a report issued online presented a sweeping review of Detroit’s problems, from gaping budget deficits to a crushing debt load to abandoned homes and broken streetlights.

Orr, a corporate bankruptcy expert, said he still believes he can fix Detroit finances without filing for bankruptcy. But when asked at a news conference, he said the option is still on the table.

“We can achieve what we have to achieve without going in. If we can’t, then we have to” file for bankruptcy, he said.

In his first report as Detroit’s emergency manager, Orr said Detroit is far from fixing the problems that caused Gov. Rick Snyder to appoint him as emergency manager in mid-March.

“The City of Detroit continues to incur expenditures in excess of revenues despite cost reductions and proceeds from long‐term debt issuances,” Orr wrote. “In other words, Detroit spends more than it takes in – it is clearly insolvent on a cash flow basis.”

Legal experts indicated the declaration of insolvency is important, because the city cannot make a bankruptcy filing without an official declaration of insolvency.

Some matters will press on Orr immediately. For example, investors who hold $377 million in interest-rate swap contracts obtained the right to demand immediate payment the moment Gov. Rick Snyder appointed Orr to the job, Orr disclosed.

Detroit had only $64 million in cash on hand and current obligations of $226 million on April 26, 2013, a negative net cash position of $162 million, the report said.

James Spiotto, an expert in municipal restructuring and partner at Chapman and Cutler in Chicago, said Orr drew a bleak picture, but bankruptcy could be avoided with cooperation between the city and state.

“Obviously, there is an urgency, but it’s not time to panic,” Spiotto said. “You need a sustainable, affordable recovery plan.”

Operating expenditures have exceeded revenues by about $100 million a year since 2008, Orr’s report found. The city had an accumulated $326.6 million unrestricted deficit. Detroit is projected to add an additional $60 million to the accumulated deficit by the time the current fiscal year ends June 30.

Payments of Detroit’s long-term debt are eating up nearly 20 percent of Detroit’s budget, and Orr is looking to renegotiate or restructure Detroit’s $8.65 billion in long-term debt.

He may reschedule payments, reduce the principal, renegotiate interest rates or issue new debt guaranteeing bondholders payment on Detroit’s existing obligations.

Patrick O’Keefe, chief executive and founder of turnaround specialists O’Keefe and Associates Consulting LLC, based in the Detroit suburb of Bloomfield Hills, said the city’s financial weakness gives it negotiating leverage with the holders of the swap contracts.

“My guess is they (Detroit) don’t have the money so they are not that worried,” O’Keefe said. “It’s a little bit like fighting the ugly kid in the school yard in that he can’t get any uglier.”

Pension payments to city workers represent another drain on the city’s finances. Detroit will make $31 million in pension payments this year, but will defer another $108 million. Orr said a city task force is reviewing actuarial assumptions Detroit uses to estimate its obligations.

The city also has $5.7 billion in unfunded retiree benefit obligations, more than previous estimates, the report found. To catch up on pension and health benefits to retirees, the city would need to spend $339 million, about a third of its fiscal 2013 revenues, Orr estimated.

All told, Detroit has liabilities totaling $9.4 billion in debts from special revenue bonds, revolving loans, pension obligations and other financial instruments.

“Debt service payments place a significant strain on the city’s budget,” the report said.

New York City, Philadelphia and Cleveland avoided bankruptcy courts with loans and grants designed to keep the cities afloat while a long-term recovery plan was in the works.

At investment firm BlackRock in New York, Orr’s report was seen as a summary of information that the market already knew.

“The identification of these items are still far from the resolution of these items, and that is ultimately what has to take place here”, said Peter Hayes, head of BlackRock’s municipal bonds group, which has $114 billion in assets under management.

Labor is among the city’s largest challenges. Noting that state law authorized him to “reject, modify or terminate” any of the city’s 48 collective bargaining agreements, Orr said he was considering all options.

“This power will be exercised, if necessary or desirable, with the knowledge and understanding that many City employees already have absorbed wage and benefit reductions,” the report said.

The report also noted that a review of police, fire and other emergency services was ongoing and that Detroit’s “infrastructure and public safety fleet are aged and decrepit, which, in turn, increases the City’s operating and repair costs and decreases its productivity.”

Both the police and fire departments are in need of restructuring, Orr found.

Orr’s report also noted that changes to the city’s charter and legislation may be required to reduce bureaucracy and improve operations.

(Reporting by Nick Carey and Steve Neavling.; Additional reporting by Bernie Woodall and Deepa Seetharaman.; Editing by David Greising, Sofina Mirza-Reid and Leslie Gevirtz)

The city has set aside far less than expected for retiree
healthcare benefits, too. A report from Michigan State
University in March stated that Detroit has $4.9 billion of
unfunded benefit liabilities. But Orr’s review has found the
shortfall actually is $5.7 billion, 16 percent higher than
expected, according to Orr’s spokesman, Bill Nowling.

Orr will address the city’s finances Monday when he delivers
a report to the state. He is expected to report on Detroit’s
projected budget deficit and pension underfunding, too, but
Nowling would not discuss details of those items.

Orr, who previously worked on the restructuring of U.S.
automaker Chrysler LLC, has sweeping powers as emergency manager
to deal with a city where the population of 700,000 is a
fraction of its 1950s peak of 1.8 million people. Detroit has
difficulty providing adequate policing and basic services like
street lights and working fire equipment.

After maintaining a low profile since being appointed, Orr
will give his first public indication of how bad the problem is,
and how he hopes to fix it. The findings to be delivered to the
state of Michigan will come from a detailed financial review he
has conducted since he stepped in as emergency manager.

“If we keep going down this path, there are only dragons,”
said Nowling. “There are no more corners to cut or one-time
fixes to make. We have to make some really, really major
restructuring decisions, and it has to happen quickly.”

The stakes are high for Orr and his credibility. After
arriving with much fanfare, and amidst some controversy over the
state takeover of Michigan’s biggest city, Orr has worked mostly
behind the scenes, developed a rocky relationship with Mayor
Dave Bing and the city council, and moved more cautiously on
cost-cutting and infrastructure improvements than many observers
had expected.

Orr is required to deliver a plan for tackling the city’s
annual $100 million deficit on Monday in order to meet a
deadline set by the Michigan state law that allowed Republican
Governor Rick Snyder to put him place in late March.

The scale of problems is so great that Orr’s office has
warned that there are limits to what he can offer this early on.

“I would be enthused but surprised if we see anything in
terms of details” from Orr, said Patrick O’Keefe, chief
executive and founder of turnaround specialists O’Keefe and
Associates Consulting LLC, which is based in the Detroit suburb
of Bloomfield Hills. “All we’re going to see is the foundation
and an outline of the issues that are going to be tackled.”

Orr’s deliberate approach contrasts with the tone he set at
the start. In an interview with Reuters just days after his
appointment, he raised the prospect of a bankruptcy filing.

“Let’s get at it and work together because we can resolve
this (as) people of good faith,” Orr said. “Don’t make me go to
bankruptcy court.”

DELICATE TASK

As an unelected official, tasked to guide the turnaround of
a heavily Democratic city by a Republican governor, Orr faces a
politically delicate task. So far, restructuring and bankruptcy
specialists say Orr has struck the right tone resisting
temptation to use broad powers that would allow him to remove
the elected city council and Mayor Bing from the city payroll.

“Orr has at least tried to keep them involved,” said Douglas
Bernstein, a Bloomfield Hills-based attorney who specializes in
commercial and municipal bankruptcy. “Whether or not he listens
to them is another matter.”

Bing has complained publicly about being ignored, but in an
email to Reuters, he said their relationship “continues to
evolve.”

“We are meeting more regularly and continue to exchange
thoughts and ideas on various issues,” he wrote.

Orr does seem to listen to consultants, who have been paid
$13 million by the city in the last six months. Orr has
continued to rely heavily on consultants, and drew some
criticism for his decision to approve the hiring of his former
law firm, Jones Day, for legal advice.

“My concern is that we’ve brought in all these consultants
and I’m not sure it’s entirely clear to anybody exactly what
they’re doing and who’s monitoring them,” said council member
Kenneth Cockrel Jr.

But bankruptcy attorney Bernstein said the use of
consultants was “absolutely necessary” because while the city is
obliged to produce a balanced budget, for years its projections
of revenue and spending “have not been based in reality.”

UNION NEGOTIATIONS

By all accounts, though, Orr has barely begun on the work he
must complete if he is to succeed during an expected term of 18
months on the job. He will have to negotiate concessions with
the city’s 48 unions and decide how extensively to cut services
or city payroll. He also must negotiate with bondholders who are
uneasy over Detroit’s fiscal instability.

Union leaders described meetings with Orr as cordial but
no-nonsense. Orr has made clear his intent to impose new labor
contracts. “We had a nice conversation, but that’s not going to
get us a negotiated contract,” said Dan McNamara, president of
the Detroit Fire Fighters Association.

Still, labor unions will have limited options. The state law
does not require Orr to negotiate with unions or even
participate in arbitration proceedings, and Orr has filed
official notice that he may exercise those rights.

Labor costs will be a rich target, said Joseph Harris,
former emergency financial manager for Benton Harbor in western
Michigan. Harris has studied the cost of police, and
firefighters in comparable cities – Milwaukee, Atlanta,
Cleveland, St Louis and Pittsburgh – and found Detroit is more
expensive in every key metric: cost per capita, cost per square
mile and cost per police officer and firefighter.

“Even if Detroit was to spend the average of what its peers
do, the city could save $200 million a year,” he said.

Turnaround specialist O’Keefe said Orr has kept a
surprisingly low profile, but that this may be necessary because
talks with the city’s unions are so sensitive.

“It is slow going with the unions because they are worried
that if they make the first deal (with Orr) it’s going to be the
worst deal,” O’Keefe said.

Orr also faces structural problems that must be addressed.
Cutting city services in itself is not an effective long-term
strategy, O’Keefe said. “The real issue is what to do about the
long-term debt and legacy costs that are staggering,” he said.

Nowling, Orr’s spokesman, said the debt threatens Detroit’s
ability to deliver basic services. “If the city stopped
providing services and did nothing but pay off its debt, it
would take the city 15 to 20 years to eliminate the debt,”
Nowling said.

A team leader for the all-volunteer firefighting force in West, the 50-year-old worked at the plant mixing combustible chemicals to make fertilizer for use on the fields of corn and other crops that surround the rural Texas town.

“(Cody) knew what he was up against,” said Danny Mynar, whose cousin was married to Dragoo. “He knew about the dangers. We talked about it. But whoever dreams something like this can happen?”

Dragoo was one of the five volunteer firefighters among the 14 people who died when the blaze in West, Texas, erupted Wednesday night into a fireball that left 200 injured, razed 50 homes and left the tight-knit town of 2,800 in shock. Several more firefighters were injured.

The cause of the explosion is yet to be determined, but the outcome is a stark reminder of the risks for the largely unpaid and underfunded volunteer forces who make up the bulk of the country’s firefighters: they can find themselves battling the same kinds of complex fires as their paid and often better-equipped professional counterparts in big cities.

“What came to my mind when I heard about the explosion is this is a very risky business on a good day,” said Philip Stittleburg, chairman of the National Volunteer Fire Council (NVFC) and a volunteer since 1972. “There are inherent risks involved and we train very hard to determine whether risks are worth taking.”

“Sometimes there are hidden risks that can’t be assessed, regardless of training,” he said.

Volunteer firefighting is a staple of American towns, ever since founding father Benjamin Franklin started a modern fire service in 1736. The NVFC says some 69 percent of around 750,000 U.S. firefighters are volunteers, juggling jobs and home life with ladder rescue training exercises.

West firefighters said the crew of 29 had done regular training, including exercises at the West Fertilizer plant.

The plant housed both ammonium nitrate, a component for fertilizer also sometimes used to make explosives, as well as anhydrous ammonia, a widely used source of nitrogen fertilizer which is stored under high pressure in specially designed tanks because of its volatility. It can quickly convert to a gas when pressure is released and it is considered one of the most dangerous chemicals used in agriculture.

BARBECUE COOK-OFF BUYS EQUIPMENT

Like other small towns, West’s volunteers have little public funding. McLennan County, where West is located, budgets about $5,000 annually for the force, said county commissioner Will Jones.

The city adds a little for equipment upkeep and fuel, but most financial support comes through public donations, said Steve Vanek, a volunteer firefighter and West’s pro-tem mayor.

“We are a small town,” Vanek said. “We don’t have the big tax dollars other cities have.”

Firefighting is an expensive business: even a coat and pants for a firefighter cost around $2,000. To pay the bills, West’s unpaid firefighters hold annual fundraisers, including a barbecue cook-off that is popular with locals. County commissioner Jones said the most recent fundraiser, held just last month, raised about $100,000.

According to the Texas A&M University Forest Service, West’s volunteer fire force has received just over $50,000 in state grants since 2003 and has over $160,000 in outstanding grant requests, most of which would go to buying a single brush truck.

West lost three of its five fire engines in the blast, including a new $200,000 pumper.

Budget cutbacks and austerity in the wake of the Great Recession have also taken a toll. In Texas, where 78 percent of firefighters are unpaid volunteers, those cuts have been harsh, said Chris Barron, executive director of the State Firemen’s and Fire Marshals’ Association of Texas.

In 2011, a year of destructive wildfires in Texas, the state’s 1,400 volunteer fire departments saw funding cut to $7 million from $30 million. That has since been raised to $18 million, but Barron says volunteer departments have $150 million in outstanding requests for equipment and protective clothing.

Texas Governor Rick Perry’s office did not respond to a query as to whether there will be a review of spending on firefighting in the wake of the West blast.

Volunteers often pay for fuel for their fire trucks out of their own pockets, lack protective clothing, have to repair equipment themselves as best as they can or have to deal with out-of-date training materials, Barron said.

He said his association is now trying to raise money to help replace the three fire trucks destroyed in the explosion.

“We understand that in hard times there have to be budget cuts,” Barron said. “But it is frustrating.”

West is still reeling from the explosion, which has left locals “broke down,” said the volunteer firefighter Vanek.

But there is also pride in what these volunteers did.

“They did everything by the book,” said Texas State Representative Kyle Kacal, whose district includes West. “They did everything capably.”

As for the need to raise money and keep going, some firefighters said they were determined to rebuild and that everyone in West would rally round. Others said the perennial need for funds was just a fact of life.

“We all feel like there should be more (money),” for equipment, said Mynar. “It is what it is.”

(Additional reporting by Colleen Jenkins in West, Texas; Editing by Mary Wisniewski, Mary Milliken and Eric Walsh)

Observers said the book could be a signal that Walker, who
last year became the first U.S. governor to survive a recall
election, is contemplating a presidential bid.

“Unintimidated: A Governor’s Story and a Nation’s Challenge”
will be co-written by Marc Thiessen, a former speech writer for
Republican President George W. Bush, and is tentatively
scheduled to be published by Sentinel, part of the Penguin
Group, late this year.

“Writing a book has become part of the template of U.S.
presidential politics,” said Mordecai Lee, a professor of
governmental affairs at the University of Wisconsin in
Milwaukee. “It’s part of the checklist of things you need to do
as it apparently gives you credibility.”

A spokesperson for Walker’s 2012 election campaign said the
governor “is excited to be working with Sentinel and looks
forward to the launch of the book this fall,” but referred any
further comment to the publisher.

Walker sparked controversy in Wisconsin in early 2011 when
he signed into law a bill passed by the new
Republican-controlled state legislature that limited the
collective bargaining rights of unionized public sector workers.

The law led to mass protests at the state capitol in Madison
and a wave of recall elections, mostly against Republican
officials.

Beloved by U.S. conservatives for taking on the labor
unions, Walker has been reviled by liberals for what they decry
as an attack on America’s struggling middle class.

Walker is seen as one of a number of Republicans who may
seek their party’s presidential nomination in 2016. Others
include Louisiana Governor Bobby Jindal and U.S. Senator Marco
Rubio of Florida.

Presidential hopefuls from Jimmy Carter (“Why Not The Best?”
in 1976) to Mitt Romney (“No Apology” in 2011) have published
books before or during their presidential bids, to varying
degrees of success.

Julian Zelizer, a presidential historian at Princeton
University, said that a book makes sense for Walker, as it could
boost his name recognition outside his home state and among
conservatives.

“A book provides an opportunity to personalize Walker and
give Americans a sense of who he is,” Zelizer said. “It can also
serve as an election pamphlet and help him shape the discussion
about him before his opponents can do it.”

(Reporting by Nick Carey in Chicago; Editing by Scott Malone
and Leslie Adler)

The biggest state takeover of an American city in over two
decades comes the year before many expect the
businessman-turned-governor to seek re-election in 2014. In any
political calculating, Snyder probably didn’t count on
Detroiters getting him to a second term.

“The people of Detroit are not going to vote for Rick Snyder
anyway,” said Bill Ballenger, a longtime pundit and publisher of
Inside Michigan Politics. “I think there is a fairly strong
majority of people outside Detroit who feel an emergency manager
should be appointed.”

For fixing the finances of the majority black city, Snyder
tapped Kevyn Orr, an African-American lawyer and life-long
Democrat who studied in Michigan and specializes in corporate
bankruptcy. At his presentation to the Detroit media on
Thursday, Orr acknowledged the political pressures on Snyder,
including from those who asked why he was spending so much time
on Detroit.

He said the governor told him, “It is the right thing to do
and the right time to do it.”

In his first political office, Snyder, the former chief
executive of venture capital firm Ardesta, has earned the
reputation in the governor’s mansion as a businessman who gets
things done, with little regard for the political fall-out. His
campaign to rescue Detroit has the tone of an impatient CEO,
employing the slogan “Detroit Can’t Wait.”

Orr’s appointment will likely usher in a new period of
painful cutbacks for a city long in decline, but he said he
wants to avoid sending Detroit to bankruptcy court. Such a
filing, if allowed by the state, would be the biggest Chapter 9
municipal bankruptcy in U.S. history.

‘NO DOWNSIDE FOR GOVERNOR’

Formerly home to 1.8 million people, Detroit once had
significant electoral muscle in Michigan. But Detroit’s
population has fallen to around 700,000 people, or less than 8
percent of the state’s population, and the city has less support
in the state capital, Lansing, than it did during its heyday.

The former automotive powerhouse’s decline has long been
compounded by financial troubles that are almost as well known
as the music that made Motown famous.

“Make no mistake, Detroit is bankrupt,” said Jim McTevia, a
specialist in restructuring and managing member of management
and financial consultant McTevia & Associates. “In this set of
circumstances there is no downside for the governor.

“I think Snyder will be remembered as the politician who
saved Detroit.”

Cuts by the administration of Detroit Mayor Dave Bing to
stave off the appointment of an emergency manager were
vigorously opposed by some members of the city’s council.

There have also been small protests in the city over the
prospect of an unelected official taking over Detroit’s purse
strings. Pastor D. Alexander, a local leader of Jesse Jackson’s
Rainbow PUSH Coalition, said Snyder would suffer for a takeover
if he runs for a second term in 2014.

“Governor Snyder risks wakening a sleeping giant,” he said.
“If Detroit comes alive, he will not be re-elected.”

On Thursday, flanking Snyder and Orr, Bing showed his
support for the emergency manager, saying, “There is no doubt
that we are going to work together.”

‘PRAGMATIC, NOT DOGMATIC’

McTevia, the consultant, said a crucial point for Snyder is
that any emergency financial manager will need help from city
officials to succeed.

“This will take team work to fix,” he said.

Michigan’s governor also has the support of much of the
local business community, which has applauded his support for a
new bridge to Canada, which many conservatives oppose, and for
regional transit and lighting authorities in Detroit.

“The reason why we are so supportive of the governor is that
here’s a Republican who has clearly chosen to support Detroit,”
Sandy Baruah, chief executive of the Detroit Regional Chamber of
Commerce. “Governor Snyder is very pragmatic, not dogmatic.

“He’s all about getting stuff done.”

Lyke Thompson, a political analyst at Wayne State
University, said that while taking over Detroit’s finances
“could be a win” for Snyder if the move is successful, the
opposite would be true if the city ended up in bankruptcy as
that “would happen on his watch.”

“Things could get worse before they get better,” he said.

Whether or not Snyder worries about what effect a state
takeover would have on his re-election chances in 2014 is
another matter. His office did not respond to a request for
comment.

Since taking office in 2011, Snyder has frequently annoyed
small-government conservatives, as he did last month with a plan
to expand Medicaid and raise the gas tax for road repairs.

The governor also incensed liberals and the labor movement
in December by signing “right-to-work” legislation that allows
workers to opt out of union membership.

“I think the governor looks at issues through the eyes of a
businessman and looks for solutions,” said Pat O’Keefe, CEO of
turnaround consultant O’Keefe. “I don’t think Rick Snyder cares
one way or another if he doesn’t get reelected.

“And if he is successful he will have essentially
established the blueprint for restructuring a major city’s
finances.”

King, 66, who is slated to step down in June 2014, said two
years ago that the UAW did not have a future if it could not
organize workers at plants in Mississippi, Alabama, Georgia and
Tennessee that are owned by Japanese, German and South Korean
auto makers.

In an interview on Monday, King said the so-called southern
strategy is “still a huge priority,” but he no longer
characterized it in do-or-die terms, noting that the UAW is also
expanding beyond the auto industry into areas such as gaming,
healthcare and higher education.

King said the percentage of union membership that is
automotive is now less than half, with 4,400 agricultural
workers and more than 5,000 casino workers joining in the past
two and a half years.

“We are organizing in new areas, and we’re organizing in a
broad spectrum. I think that’s good for any organization. Having
multiple bases is better for the long term,” King told Reuters.

Still, that has not satisfied some critics, who say King had
staked his presidency on pledges to organize a foreign-owned
plant.

Debate over the union’s southern strategy resurfaced after a
failed UAW-backed ballot proposal last fall to enshrine
collective bargaining rights in Michigan’s state constitution.
That defeat encouraged conservative legislators in December to
pass a law making this bastion of organized labor the 24th
right-to-work state, banning compulsory union membership as a
condition of employment.

“If he fails to organize in the south and is a flop in
Michigan, I think you could say he was a big failure,” said Bill
Ballenger, a longtime pundit and publisher of Inside Michigan
Politics, who is critical of what he calls the UAW president’s
“confrontational approach.”

“The question at that point is, what has the guy really
done? Has he been counterproductive? I think the answer is yes.”

CRUMBLING BASE

UAW membership has plunged from 1.5 million in 1979 to
380,000 in 2011, with workers from General Motors Co,
Ford Motor Co and Fiat’s Chrysler Group now
representing about a third of the total, down from
three-quarters in the 1970s.

Union membership remains concentrated in the Midwest and
Northeast. Michigan, with 130,000 members, is the stronghold,
followed by Ohio, Illinois, Indiana, New York and New Jersey.

In comparison, the UAW in 2011 had only 272 members in
Mississippi, 448 in Alabama, 615 in Georgia and 4,065 in
Tennessee.

All four states have large foreign-owned auto plants, none
of which has UAW representation, although the union since 2011
has organized several smaller southern plants operated by U.S.
parts suppliers and truck manufacturers.

“I’m the eternal optimist,” King said, when asked if he
thought the UAW would be able to organize workers at its current
southern target, Nissan Motor Co’s Canton, Mississippi
plant, before he retires. “I feel really good about this thing
in Mississippi.”

With revenue from dues plummeting 44 percent from 2001 to
2011, there is a sense of urgency behind both the southern
strategy and the diversification drive.

“This is ‘Custer’s Last Stand,’” said Alfred DeMaria, whose
New York-based law firm Clifton, Budd & DeMaria represents
employers in labor disputes. DeMaria’s dire observation
references the Battle of Little Bighorn in 1876 where Native
Americans killed General George Custer and over 260 of his men.

Longtime labor expert Sean McAlinden disputes DeMaria’s
contention.

“I don’t see this particular Nissan organizing effort as a
bellwether that says if they don’t win this one, they’ve failed
for good,” says McAlinden, chief economist with the
Michigan-based Center for Automotive Research. “This is a very
long process.”

Win or lose in the south, diversification remains a critical
issue for the UAW.

“They need to diversify or die,” said Justin Wilson of the
Center for Union Facts, a conservative group critical of union
leadership.

King, who early in his career worked for each of the Detroit
3, has been a UAW member for more than 40 years. As a union vice
president in the late 1990s and early 2000s, he spearheaded the
UAW’s diversification drive, organizing tens of thousands of
workers in retail companies and casinos, university graduate
student teachers and research assistants, and federal, state and
local government employees.

When asked if the southern strategy will determine his
legacy, King said: “I don’t mind talking about where the UAW’s
going and what we’re doing, but I think two years into (my)
administration is too early to be talking about a legacy.”

“Give me another year, then talk about my legacy,” he said.