May 8 Legislation introduced on Thursday in the
Michigan House of Representatives would tie state money key to
Detroit's bankruptcy exit plan to oversight and other
Detroit's plan for dealing with $18 billion of debt and
emerging from the biggest municipal bankruptcy in U.S. history
depends on $816 million pledged to ease the impact of pension
cuts on retired city workers and avoid a sale of city art work
to raise money for creditors.
The so-called grand bargain includes $350 million in state
money that Michigan Governor Rick Snyder has asked lawmakers to
approve. Philanthropic foundations and the Detroit Institute of
Arts pledged the rest of the money.
Under the legislation, Michigan would make a single upfront
payment of nearly $195 million, instead of $350 million spread
over 20 years. The money would be taken out of the state's rainy
day fund and paid back over 20 years with proceeds from
Michigan's share of a national settlement with U.S. tobacco
The 11-bill package also creates a seven-member commission
to oversee the city's finances that is modeled after one put
into place following New York City's fiscal crisis in the 1970s.
Detroit is run by state-appointed emergency manager Kevyn Orr,
whose term is scheduled to end in September.
"A contribution to this settlement, if done properly, is a
contribution toward change and accountability," House Speaker
Jase Bolger, a Republican, said in a statement. "This package of
bills would finally face the problems of Detroit and its impact
on our state head on. These reforms would deliver long-term and
The legislation would also require all collective bargaining
agreements with city unions to be approved by the Detroit
commission, and 401k retirement plans instead of pensions for
all workers hired after current collective bargaining agreements
Snyder, a Republican, said the bills reflect the willingness
of state lawmakers to help Detroit pensioners and ultimately
save the state money.
Bolger, who formed a House Committee on Detroit's Recovery
and Michigan's Future this week, indicated the bills will move
quickly during the coming weeks through a transparent committee
Also on Thursday, an attorney representing four Detroit
public safety unions signaled that two of the unions are likely
to continue to fight the city's debt adjustment plan. Barbara A.
Patek, an attorney with Erman, Teicher, Zucker & Freedman, asked
U.S. Bankruptcy Judge Steven Rhodes to allow her to withdraw
from representing the Detroit Police Lieutenants & Sergeants
Association and the Detroit Police Command Officers Association,
which have entered into tentative settlements with the city.
Patek told the court she would continue to represent the
larger unions, the Detroit Fire Fighters Association and the
Detroit Police Officers Association, which "have been unable to
reach an agreement in spite of exhaustive efforts by the parties
and the mediators." She added it is "probable" the two unions
will be objecting to Detroit's plan "on various grounds."
Orr in recent weeks has been reeling in agreements with key
creditors, including the city's two pension funds, three bond
insurance companies, unions, and retiree groups. Holdouts
include bond insurers Syncora Guarantee and Financial Guaranty
Insurance Co, which are on the hook to make payments on
defaulted debt Orr has labeled as being unsecured.
(Reporting By Karen Pierog in Chicago; Editing by Mohammad