May 6 (Reuters) - A special Michigan legislative committee will consider Governor Rick Snyder’s proposal to allocate state funds as part of Detroit’s plan to get out of bankruptcy court, the House speaker announced on Tuesday.
Speaker Jase Bolger, a Republican, said in a statement that the newly created bipartisan House Committee on Detroit’s Recovery and Michigan’s Future will take up a legislative package.
Detroit’s plan for dealing with $18 billion of debt and exiting the biggest municipal bankruptcy in U.S. history depends on money pledged to ease the impact on retired city workers and avoid a sale of city art work to raise money for creditors.
The $816 million, so-called grand bargain, includes $350 million in state money that Snyder has asked lawmakers to approve. Philanthropic foundations and the Detroit Institute of Arts pledged the rest of the money.
U.S. Judge Steven Rhodes, who is overseeing Detroit’s bankruptcy case, on Monday approved a document that will be sent to the city’s thousands of creditors for them to vote on the debt adjustment plan. The approved final version of the disclosure statement allows Michigan to make a single upfront payment of about $195 million instead of $350 million spread over 20 years.
Members of Detroit’s two retirement systems would have to vote in favor of the plan in order for the city to obtain the $816 million over 20 years and use it to mitigate pension cuts. Last week, Rhodes emphasized during a court hearing that if the state money is not in place by the time the confirmation hearing on Detroit’s plan begins on July 24, votes by participants in the retirement systems in favor of the plan would turn into votes against the plan.
An affirmative vote would give public safety workers 100 percent of their current pensions and 45 percent of current cost-of-living adjustments (COLAs). General city worker pensions would be cut by 4.5 percent and COLAs eliminated.
Under a no vote, which would mean the loss of the $816 million, public safety worker pension COLAs would be gone and the pension cut for general worker pensions would increase to 27 percent.
Detroit in recent weeks has won agreements from its two retirement systems’ boards and retiree groups and unions for pension components of the debt adjustment plan. (Reporting By Karen Pierog; Editing by Grant McCool)