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Detroit businesses fret over city’s unpaid bills

July 30, 2013

DETROIT (AP) — The trucks Steve Atwood used for hauling gravel, concrete and asphalt to street paving jobs sit idle. The nine drivers who worked for him have been laid off, and Atwood_who has started driving for another company_wonders whether he’s out of business now that his sole customer, the city of Detroit, says it’s bankrupt.

“That’s all we’ve got,” said Atwood, referring to his city hauling contracts, which are now part of a mountain of unpaid bills and unmet obligations that have been turned over to Detroit’s federal bankruptcy judge to settle.

The city’s decision on July 18 to enter bankruptcy, with debts that may amount to $20 billion, has left more than 7,000 vendors and contractors wondering about money they’re owed and the uncertainty of future payments as the court process proceeds.

The city’s emergency manager, Kevyn Orr, has included their bills in the city’s unsecured debt, and proposed settling them for less than 10 cents on the dollar. U.S. Bankruptcy Judge Steven Rhodes has begun hearings on the city’s case, which could last months or even years.

“They haven’t paid me,” said a worried Anthony Davis, whose AC Towing company is owed several thousand dollars for towing cars from traffic accidents and crime scenes for the police department. “I’m praying to the Lord that I do get paid because I paid my drivers already.”

He’s admits he bitter. “I live in Detroit, work in Detroit, worship in Detroit and pay my taxes,” he said. “The city let me down.”

But among some vendors, the anger about bad debts is softened by concern about getting the city back on its financial feet so normal business can resume. The city is an essential customer for many local enterprises, from mom-and-pop suppliers to major companies and nonprofits.

In 2012, Detroit spent about $43 million for professional and contract services. Another $62 million was spent on materials and supplies. The city hires out for everything from filling potholes and washing cars to medical rehabilitation for employees.

Many contractors say they can’t replace that income from other customers. Orr is continuing to authorize some payments so that essential services can continue.

“The larger question for us at this point is what happens to the contract going forward,” said the Rev. Faith Fowler, executive director of the nonprofit Cass Community Social Services, which is owed more than $36,000 for providing meals for city prisoners.

“We have had a good relationship with the city and, obviously, we want to help in any way that we can, especially during this challenging time, he said. “Providing services with no reimbursement or reimbursement delayed for a year or more is simply unsustainable on our end.”

Many companies got their city contracts when the economy and Detroit’s finances were better. Some owners realized things were getting dicey as Detroit’s budget deficit ballooned over the past decade or so.

“They have been paying us slowly for years,” Atwood said of his hauling contract. ”...Sometimes it’s two and three and occasionally four weeks. And sometimes it’s very difficult to wait that length of time.”

Atwood would not say how much he is owed, only that it is “quite a bit of money.”

Many owners say their worried about they’ll make ends meet.

“Cass will be just one in a long line of vendors seeking payment and we have anticipated this for some time,” said Fowler.

The nonprofit is assessing the impact of the lost money on its programs for feeding senior citizens and the homeless.

Even though he hasn’t been paid, Davis said he doesn’t dare stop responding to city towing calls, which are supposed to earn him $125 per vehicle towed. “If we don’t (do the work), we lose the contract,” he said. He’s already cut his fleet of 10 tow trucks to five.

Bryan Knoche, office manager of Fred’s Key Shop, says he’s lucky that the city only accounts for 10 to 15 percent of the shop’s business.

“We prefer to have that money, but it’s not make-or-break for us,” said Bryan Knoche, office manager of the 51-year-old company, which has 15 employees.

Knoche said the city still owes $2,000 for work done years ago for various departments.

“It’s sort of the cost of doing business with any sort of government agency where things can go wrong,” he said.

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