(Recasts with governor's plan; adds legislative leader
comments, ruling by judge on art appraisal)
Jan 22 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 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
"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)