Obama, Michigan in Talks to Free Up $100M to Aid Detroit Pension Deal
By Matt Helms, Stephen Henderson and Todd Spangler
The Obama administration and state officials are in discussions on a deal that would free up an additional $100 million to soften the blow to Detroit pensioners, two people familiar with the talks told the Free Press late Tuesday.
The two sources, who spoke on condition of anonymity because they weren’t authorized to disclose the information, confirmed that there have been talks about the federal government supporting a move by the state to give Detroit $100 million in federal money for blight remediation. That, in turn, would free up $100 million of the more than $500 million that emergency manager Kevyn Orr planned to spend for blight removal over the next 10 years. Orr could then use that money to reduce pension cuts.
The federal funds would come from the Hardest Hit Fund, a $7.6-billion Obama administration effort established in 2010 to help the 18 states most hurt by the housing downturn.
Michigan received $498.6 million to operate homeowner assistance programs, including those offering mortgage subsidies, home loan rescues, mortgage modifications and principal debt reductions.
But as of last summer, only a portion — about $2 billion nationwide and about $94 million in Michigan — had been spent.
It was at that time that the U.S. Treasury allowed the Michigan State Housing Development Authority to use up to $100 million in unspent funds on demolitions in five cities, with the bulk going to Detroit.
The $100 million that’s now the focus of negotiations is separate from the $100 million that was set aside for blight removal in Detroit, Flint, Grand Rapids, Saginaw and Pontiac, the sources said.
But the talks are fraught with political ramifications for both President Barack Obama and Michigan Gov. Rick Snyder.
Obama, not keen to set a precedent of the federal government sending money to cities or states with deep pension debts, has publicly said there’s no support for a bailout of bankrupt Detroit.
But Obama also has been under pressure from unions not to let retirees suffer in Detroit, a city that votes heavily Democratic.
Snyder, meanwhile, might risk a backlash in an election year from Republicans and outstate voters if he outwardly appears to be supporting a shift of more resources to the city.
Snyder already has pledged the state’s support to send $350 million to the city as part of the grand bargain to help rescue the Detroit Institute of Arts and bail out the pension funds.
He is currently courting the state Legislature for that support.
Snyder’s office declined to comment Tuesday night, as did Orr’s spokesman, Bill Nowling.
One of the sources said the $100 million in federal money was discussed Tuesday night in breakneck negotiations that resulted in a tentative deal to reduce pension cuts for the city’s retired general workforce and police and firefighters.
It wasn’t immediately clear whether the $100 million in federal funds is included in the calculations in Tuesday night’s pension agreements.
The White House wouldn’t comment late Tuesday on the negotiations. But Obama administration officials have for months been looking for ways to help Michigan and Detroit leverage existing federal funds.
(c)2014 Detroit Free Press