Finance

Detroit Aid Package Awaiting Governor's Signature

by | June 4, 2014
 

By Kathleen Gray

The grand bargain of bills that will send $194.8 million from the state to the City of Detroit to help settle the city's bankruptcy sailed through the state Senate with large bipartisan majorities Tuesday and are on their way to Gov. Rick Snyder for his signature.

Passage of the bills was a seminal moment in the city's historic Chapter 9 bankruptcy process and will strengthen the possibility of a successful reorganization and emergence.

With the state's contribution in hand, the city will have extra leverage in pushing pensioners and creditors to accept a settlement, pensioners will have added assurance that their retirement savings will be secure and the federal judge overseeing the proceedings will have firmer ground on which to base his rulings. It was a huge win -- though the fight is far from over and now moves back to Detroit.

Senate Majority Leader Randy Richardville, R-Monroe, called the package of nine bills a "smart, conservative decision," that will help ease cuts to pensioners, save the artwork at the Detroit Institute of Arts from sale, and shield the state from future lawsuits regarding the bankruptcy -- a major incentive for lawmakers.

Missing from the package was a bill that would have prohibited the DIA from seeking a renewal of a millage to support the museum or asking for a new one.

"There was no support for that on this committee," Richardville said. "That was difficult for me. It's an important asset for the City of Detroit and state of Michigan. It was strange that the Legislature would be telling local governments that they can't make their own decisions, or have a vote of their own people."

Many of the bills -- especially those providing state oversight over the city and setting limits on what can be contributed to pension and health care plans -- passed with large bipartisan majorities. The bills providing the actual money to the city were much closer, passing by votes of 21-17, one more than was needed for passage.

"We are all politicians, that's the nature of the game," said Sen. Tupac Hunter, D-Detroit, giving kudos to both Gov. Rick Snyder and legislative leaders on both sides of the aisle for their leadership on the bill. "This is one of those times that we are to be statesmen."

Snyder returned the favor, praising the thoughtful consideration given by bipartisan majorities in both the House and Senate.

"This is what bipartisanship is all about. This was about great teamwork," Snyder said. "And this is a historic day in terms of looking at Michigan's future. This package of bills will allow the grand bargain to go forward and let people know that Detroit is a growing community, and everyone is focused on the growth of the city."

U.S. District Judge Gerald Rosen, the chief federal negotiator on the bankruptcy case, met with senators Tuesday morning and stayed to witness the bills passage.

"This is so important. Today (Tuesday) we are all Detroiters, and we are all Michiganians," he said. "And I can't help but think that today we've set a template of how things can be accomplished in a political environment, and in a non-political way."

The vote came after the Senate Government Operations Committee heard from a handful of groups, most of whom supported the grand bargain. The House had passed the bills last month.

"We are dedicated to making Michigan a top 10 state for jobs, and to get there we need our largest city at its best," said Tim Sowton, of the Business Leaders for Michigan. "We believe this package is a thoughtful plan for facilitating a quick exit from bankruptcy."

But Annie Patnaude, of the tea party affiliated group Americans for Prosperity, said that Detroit should be treated like her son who got his toys taken away recently for misbehaving.

"Detroit needs to take responsibility for fiscal mismanagement and cronyism," she said. "If we can't hold Detroit responsible, there will be no meaningful change."

Her argument was for naught.

"This is a really powerful moment. And it's incumbent upon us to embrace this delicate balance," said Senate Minority Leader Gretchen Whitmer, D-East Lansing.

Richardville said it was essential that the Senate voted quickly to ensure that pensioners contemplating ballots on the plan of adjustment have the certainty of the state's portion of the grand bargain. Those ballots are due July 11.

The state's proposed one-time contribution -- calculated as the equivalent of $350 million over 20 years -- would be combined with $366 million pledged from charitable foundations and $100 million from the DIA. At least two union organizations also have pledged unspecified financial support in response to a request from House Speaker Jase Bolger, R-Marshall. And Rosen announced Tuesday that the Skillman Foundation had pledged nearly $4 million to the grand bargain, upping the total foundation support to $370 million.

The bills set up a nine-member oversight commission with authority over the city's finances, budgets and contracts for at least 13 years, and set the level of contributions made to city employees' retirement and health care plans.

"Today's vote by the Senate to approve $195 million in financial aid for the city of Detroit will help us honor the contract we made with our city retirees," said Detroit Mayor Mike Duggan in a statement. "The kind of bipartisan support we are seeing in Lansing right now is a clear sign of a new beginning for the City of Detroit."

The most contentious bill in the package, which would prohibit the DIA from seeking renewal of a tri-county millage that now provides some of its financial support, didn't make it out of committee.

Annmarie Erickson, executive vice-president and COO for the DIA, said: "Clearly we're delighted by what the Senate did. It would have prevented people voting. We don't know what the future holds for the DIA with the millage, but we deeply respect the right of people to vote."

Snyder said he would sign the bills in the next day or two.

(c)2014 the Detroit Free Press

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