May 20 Detroit's plan to deal with $18 billion
of debt so it can exit municipal bankruptcy faces a crucial test
on Wednesday, when a panel of Michigan state lawmakers votes on
legislation, opposed by some conservatives, to provide state
funding for the city.
A special Michigan House committee on Detroit's Recovery and
Michigan's Future began hearings last week on a package of bills
authorizing a $195 million lump sum contribution by the state,
and creating of an oversight commission for the city.
The state's contribution is a key component of a so-called
grand bargain that includes $466 million pledged by
philanthropic foundations and the Detroit Institute of Arts to
help ease pension cuts for city retirees and avoid a sale of
artwork to pay creditors.
But Americans for Prosperity-Michigan, a conservative group
backed by billionaire industrialists Charles and David Koch, is
revving up a campaign against using state money to help Detroit.
Scott Hagerstrom, the state director of the group, said
Detroit, already the top city recipient of state revenue
sharing, should be selling assets such as art rather than
looking to Michigan for a bailout.
"We want to make sure citizens are fully aware of where
their legislators stand on this legislation," he said.
Meanwhile, U.S. Bankruptcy Court-appointed mediators
announced late on Monday that the Michigan Building and
Construction Trades Council will also participate in the debt
adjustment plan by making material contributions for retiree
"It is hoped that other labor organizations will soon come
to the table and support this effort to assist Detroit's
retirees in meeting their health care costs," they said in a
The mediators noted that all the contributions were
contingent on each other. Without the money from the grand
bargain, pension cuts to retired Detroit workers would increase
and could force some to seek state assistance.
Michigan Republican House Speaker Jase Bolger has been
pushing for monetary participation in Detroit's debt plan by
public labor unions.
"Speaker Bolger supports Chief Judge Rosen in his call for
more unions to come to the table as we work to resolve Detroit's
bankruptcy and the big picture of how that is going to happen
comes into focus," his spokesman Ari Adler said on Tuesday.
U.S. District Judge Gerald Rosen is the chief mediator in
Detroit's municipal bankruptcy case, the largest in U.S.
At the House committee's hearing on Tuesday, Detroit Mayor
Mike Duggan and City Council President Brenda Jones asked the
committee to allow the city's council to appoint a
representative to the planned seven-member oversight commission.
Under the initial legislation, the governor of Michigan and
mayor of Detroit would serve on the commission, with state
officials or state appointees making up the remaining members.
Duggan also presented the House committee with an update on
efforts to deal with blighted properties and build new housing,
noting that a major bank would be making an announcement.
The Detroit Free Press reported on Tuesday that JP Morgan
Chase plans to invest $100 million in the city over five years
to spur redevelopment, blight removal, and job training. The
bank will also make money available for home loans.
A Chase spokesman would only say the bank will hold an event
in Detroit on Wednesday.
(Reporting By Karen Pierog. Editing by Andre Grenon)