(Recasts with governor's plan; adds legislative leader comments, ruling by judge on art appraisal)
Jan 22 (Reuters) - Michigan Governor Rick Snyder on Wednesday unveiled a plan to tap up to $350 million in state funds over 20 years to bolster pensions for Detroit's retirees, and asserted the aid "is not a bailout" of the bankrupt city by the state.
The Republican governor, joined at a press conference in the state capital of Lansing by Republican legislative leaders, said his plan was aimed at helping to resolve Detroit's bankruptcy. The funds Michigan receives from a multi-state settlement with U.S. tobacco companies would be "a good potential source" of the money to fund his plan, Snyder said.
"This is a settlement. This is not a bailout," Snyder said. The governor added that his proposal would join another plan announced last week by a group of foundations that pledged over $330 million to protect Detroit's pensions and art museum.
For the plan to move forward, Snyder said, he would need agreements between Detroit, the state, and the city's unions, employees, and retirees, including releases from litigation claims. The governor also stipulated the money should go to mitigate the impact of Detroit's bankruptcy on its retirees. Additional conditions likely will be imposed before state money is released, he added.
Leaders of the Republican-controlled legislature said they were open to the plan. House Speaker Jase Bolger said a cash bailout of Detroit would not achieve meaningful results.
"But neither would turning our back on the state's largest city because if it were to fail it would drag Michigan's recovery with it and potentially burden taxpayers with Detroit's liabilities," he said.
Senate Majority Leader Randy Richardville said his chamber would look at the proposal over the next few weeks.
"In general I think it's something very positive," he said.
Detroit's emergency manager, Kevyn Orr, who was appointed by Snyder, expressed support for the plan.
"With today's announcement by the governor and legislative leaders, we now have an unprecedented commitment of public and private resources to help the city of Detroit fulfill its commitments to retirees and preserve one if its cultural jewels, the Detroit Institute of Arts," Orr said in a statement.
Last July, Orr filed the largest-ever U.S. municipal bankruptcy, declaring that Detroit did not have the resources to manage $18 billion of debt and liabilities.
Orr has opened the door to possibly monetizing some of the assets at the Detroit Institute of Arts, while severely cutting pension benefits. Detroit's biggest creditors are its pension funds and Orr has pegged the city's unfunded pension liability at $3.5 billion.
Earlier on Wednesday U.S. Bankruptcy Court mediators participating in Detroit's bankruptcy case lauded Snyder for helping to resolve key issues in the case.
"We hope that the governor's announcement will further assist the parties in reaching as many agreements as possible which can be included in an agreed-upon plan of adjustment," the mediators said in the statement.
Snyder said Michigan could tap into the tobacco settlement money by selling bonds tied to that revenue. Michigan already has pledged some of the tobacco money to pay off bonds it sold in 2006 and refunded in 2008 and other bonds sold in 2007, according to a Michigan Treasury spokesman
Michigan along with 45 other states entered into a settlement with U.S. tobacco companies in 1998 over compensation for the treatment of sick smokers. Since 1999, Michigan's share of the settlement totaled $4.1 billion, including $385.8 million the state received in 2013, according to data from the National Association of Attorneys General.
Last month, auction house Christie's, which was hired by the city, appraised the value of city-owned works at the Detroit Institute of Arts at $454 million to $867 million. On Wednesday, U.S. Judge Steven Rhodes, who is managing the city's bankruptcy, turned down a request from a group of the city's creditors to form a committee to arrange an independent valuation of the DIA's collection.
Rhodes said he did not have legal authority to approve the creation of the committee. Even if he did, Rhodes said, he would lack have denied the request because it should be addressed once the city files its plan of adjustment, which will lay out a blueprint for city operations after bankruptcy.
The judge cited an opinion issued last year by Michigan Attorney General Bill Schuette that the DIA's collection cannot be sold because it is held in a charitable trust for the people of Michigan.
"This is a serious argument," Rhodes said. (Reporting by Karen Pierog, additional reporting by Joseph Lichterman in Detroit; editing by David Greising, Dan Burns, Meredith Mazzilli and David Gregorio)