Michigan AG declares “grand bargain” structure legal

Michigan AG declares “grand bargain” structure legal

As the city’s Plan of Adjustment requires him to do, Michigan Attorney General Bill Schuette today filed his approval of the “grand bargain” with the bankruptcy court.

“The positive spin is that they have satisfied one more requirement for confirmation of the plan,” says Laura Bartell, Wayne State University Law School professor and bankruptcy specialist.

In the five-page filing, Schuette writes that the grand bargain is legal and that its provision transferring the Detroit Institute of Arts collection to a nonprofit “to be held in perpetual charitable trust” is also consistent with Michigan law.

“This result — a result made possible through the generous contributions of local and national foundations, the DIA and the State of Michigan — is an excellent one,” Schuette wrote in an accompanying letter to Judge Steven Rhodes.

Last year, after questions were raised about whether artwork could be sold to pay city debt, Schuette issued an opinion that the museum’s collection could not be “sold, conveyed or transferred to satisfy City debts or obligations.”

That hasn’t stopped some creditors. Bond insurer Syncora continues to advocate for the sale of the art. If that happened, per bankruptcy procedure, the funds raised would be split between all the city’s creditors. Schuette has asked Judge Rhodes to quash Syncora’s subpoena, and a hearing on that issue is scheduled for June 26.

Meanwhile, the terms of the grand bargain bring in about $661 million from the state, foundations and other organizations and individuals to help fund the city’s pensions and protect the artwork from sale. But the grand bargain also requires pensioners to approve the Plan of Adjustment, which prescribes cuts to some pension payments, increased health care costs and other hardships for the 32,000 pensioners.

Voting concludes July 11.

6.17.14 AG Approval of DIA Settlement