Detroit is going to scrap its own copper wiring, and the court’s expert witness Martha Kopacz takes the stand today. WDET’s bankruptcy reporter and Next Chapter Detroit blogger Sandra Svoboda has the latest on the bankruptcy trial, and says the end is in sight.
At the conclusion of testimony from witnesses, Judge Steven Rhodes asked which attorneys plan to make closing arguments Monday and how long they would take. Here’s what they said:
For the State of Michigan, Steven Howell, of Dickinson Wright, 30 minutes
For the Official Retirees Committee, Claude Montgomery, of Denton’s, 45 minutes
For the holders of some pension debt certificates, Jonathan Wagner, reserved his right to make closing arguments as his client hasn’t reached a formal settlement with the city.
For the pension systems, Robert Gordon, of Clark Hill, 15 to 20 minutes.
For the Detroit Police Officers Association, Barbara Patek, of Erman Teicher, possibly 10-15 minutes.
Individual objectors, Michael Karwoski and John Quinn, 30 to 45 minutes.
For the city, Bruce Bennett, of Jones Day, 3 hours.
For more information about attorneys and their clients, see “The Detroit Bankruptcy Attorneys”
Judge Steven Rhodes is questioning “his” expert witness: Martha Kopacz, a Boston-based restructuring consultant. He appointed her earlier this year, and she has been reviewing the city’s legal filings, budget reports and financial projections as well as interviewing city officials to determine the feasibility of the city’s restructuring plan.
In the last of her testimony, Kopacz called the exit financing a ship that has sailed and said adjusting it could have a negative effect in financial markets. She praised the five-year collective bargaining agreements reached. “It gets the city beyond this administration,” she said. The stability provided by the contracts help provide more accurate financial projections, which increases the plan’s feasibility, Kopacz testified.
The judge asked Kopacz what advice she would give to the Financial Review Commission, established by the state legislation to oversee the city’s finances. She said:
“I’m not sure I’d give them any advice. I think the formation of that commission is really the most important thing that the state is going to undertake and that it will hopefully support as everyone intends the effective implementation of the plan. Because the state has designated participants and the city has designated participants, whom I believe would look out of the interests of the state and look out for interests of the city, I think it would be advisable if the commission included some more independent, maybe more out of geography sort of individuals that have the requisite skills. … I would hope in the appointed people that they get some diversity of geography and mindset and skills.
Settlements with all creditors who are represented by attorneys and had filed plan objections bodes well for plan feasibility, Kopacz testified.
“It improves the feasibility,” she said. Her July report identified “unresolved issues” related to outstanding creditors. “In the report I filed yesterday, I’ve identified many of those unresolved issues that are now solved. That’s favorable to feasibility,” she said. “But the cost of those settlements has pushed the city to the skinny end of feasibility.”
Judge Rhodes asked Kopacz her opinion on how the state legislation impacts feasibility of the Plan of Adjustment. She said:
“:It favorably impacts my assessment of feasibility because the existence of the financial review commission, the oversight commission I think is a very positive, qualitative factor in ensuring that the city conducts itself in such a way that ensures or helps to ensure the commitments of the plan are going to be met.”
Rhodes asked Kopacz her opinion about the city’s leadership as related to adoption of the Plan of Adjustment. She said:
“I have a great deal of faith in Mayor Duggan and the city council, that they are going to work diligently to implement this plan.”
Rhodes asked Kopacz to give her assessment of city’s workforce and its ability implement the Plan of Adjustment. She said:
“I’ve not dealt with a significant number of the city employees. I have interacted with a lot of department heads, a lot of finance people in departments and probably middle management and up. I think there is a genuine desire to right the ship, to help the city prospect. I think that again that group needs a more detailed plans, more understanding of the changes that are envisioned but I think there is a significant level of enthusiasm at least amongst the mayor, his direct reports and the senior leadership of the city to accomplish in large measure what’s been laid out here.”
She also answered the judge’s question about what system workforce issues exist relative to the implementation of the Plan of Adjustment by saying:
“I think there are system workforce issues around training and having the right people in the right spots. The city is way underinvested in human capital, and I think there will be challenges because of the collective bargaining agreements and the civil service rules in terms of what do you do with an employee who doesn’t have the skills that the city needs going forward so that is something that organizations deal with all the time and is going to have to be effectively managed, but I think for the most part people want to do a good job. I think a lot of people will be excited to learn. They want information systems. They don’t want to wait until 5 o’clock at night until everybody’s off the system to run their report because their reports are too big and they crash the system. Employees don’t want ot live in that kind of environment.”
Judge Rhodes is asking Kopacz about risks in the Plan of Adjustment. Here are a few topics he asked about and what she said.
*If the 6.75 percent interest rate projected for pension fund investments is reasonable. “I would make it 5 percent if I ruled the world,” she said. In a nutshell: the more conservative the better.
*Whether the change in pension benefits and plans affects the bottom line. “The city needs to attract new employees. Whether or not that plan will be attractive to people who want to be employed in the city, long or short term, is left to be seen. How the hybrid plan affects the existing workers in terms of morale and motivation is yet to be seen. It doesn’t have an economic impact, per se, it has an impact on how employees view their role with the city.”
*The level of funding set aside in the city budget for contingencies. “I’m not comfortable with the level of contingency. I would like more than the 1 percent that is factored into these projections. I understand that it may not be possible but it’s a continuing concern. It was a day one concern. But at the end of the day, it doesn’t push me to a point where I think the plan’s not feasible because of it.” Kopacz said she would prefer contingency funding better targeted to the more potentially variable expenses and revenues. “It would be more functional than formulaic and it would be a whole number that would be determined based on some good analysis and conversation,” Kopacz said.
Judge Rhodes asked Kopacz about financial risks that remain for the city. Here’s what she said:
“The good news is that some of the benefits as a result of the restructuring have been fixed at reasonable levels going forward i.e. pension and that sort of thing. Obviously the city still has to susceptibility to changes in health care, which everybody does, that’s just challenging for all employers. Currently the city doesn’t’ have as many employees as it needs, and so there’s a risk that the existing employees are working more overtime. So you probably have an offset there between a lower headcount with some more overtime. I don’t think there is a large risk that the city will get out ahead of its headcount projections so I’m not particularly worried that the city will hire too many people too fast. Against that a two-edge sword in terms of getting the change implemented that needs to happen …
“The other part is really on the procurement side with expense. The other large components of city expenses are purchased services of all kinds as well as things that it buys for itself, like some material and supplies and that sort of thing. Procurement is an area where there was a lot of mischief in the past. I don’t want to get anybody mad at me, but there was a lot of mischief in procurement in the past and the city hasn’t fundamentally changed much of its procurement process although … I do think it’s going to get better. I think the information system, all of those changes, are going to help a lot but the … risk that the whole purchasing side of city expenditures could be higher than expected.”
Kopacz found the city’s revenue projections, used to create the Plan of Adjustment, reasonable. These include:
*Income tax revenues, which are project to grow at about 2 percent annually. Kopacz said those are reasonable. “I actually think they could be conservative, even with the reinvestment initiatives,” Kopacz said. “I think the risk is more external to the city in terms of macro risk, god forbid there’s another great recession or some national disaster that affects the city.”
*State revenue sharing, which comes from the constitution – which is recalculated every 10 years based on population – and statute – which sets standards the city must meet to receive the money. “The city has always received 100 eprcent of what they’re eligible for,” Kopacz said. But projections are thatstate revenue sharing payment will “stay flat,” she said. Rhodes asked her if there were risks in those assumptions.
“I suppose there’s a risk that Detroit would miss the incentive portion of revenue sharing, but I find that difficult to fathom given the current capabilities of the mayor and the financial officer,” Kopacz answered.
*The casino tax revenues, which are assumed to decrease in the near term. “The assumption is that the wagering tax will drop a little bit in the next couple years. It will flatten out and then grow very slowly at a percent a year,” Kopacz said. “I think the projection that’s there now is reasonable.
*An overall savings of $483 million because of better operations. Part of that would come from improvements to revenue collection. “The city does a very poor job of collecting money that it’s owed,” Better technology, Kopacz said, would improve those efforts.
Kopacz testified the city should publicly report how it spends the $1.7 billion, currently proposed in the Plan of Adjustment to improve city services.
“There has to be a scorecard of metrics relative to each of the restructuring initiatives as to how effective those dollars are being spent,” she said. “I think that will give good information, it will give good transparency not only for the review commission but for the citizens to understand how the city is doing in terms of making these reinvestments successful.”
Such reporting, she said, would have two purposes: internal management and external public accountability.
Kopacz also said the city should do “regular reporting” of such a scorecard. “The city should be reporting its progress more than through the (financial statement) that it does once a year. There needs to be a good dialogue between the city, the review commission, the city council in a way of reporting things out that is factual that doesn’t have public relations spin to it. It’s just data.”
Kopacz testified that the Plan of Adjustment, created largely by the emergency manager, is not optimally integrated into the city budget or departmental operations, overseen by the City Council and the Mayor.
“It’s not in the budget and there’s not a robust implementation plan behind it,” she said.
Rhodes asked her if she had spoken to city officials about that.
“I have, and they agree with me,” she said.
Rhodes asked if she had “seen any evidence of movement toward resolving this issue of getting these changes into the budget?”
“Yes, on a department-by-department basis, yes, they are working on that,” she said.
Rhodes asked Kopacz about her opinion of how the 15-month-old bankruptcy process has gone. Here’s what she said:
“The speed of this proceeding has been a two-edged sword. The good side of that is that in little more than a year, the city will have gone through a massive restructuring process and will have significantly de-levered its balance sheet. Going from in excess of $10 billion to less than $4 billion is a huge de-levering of the city and that’s a really good thing. But because the focus has been on the bankruptcy and the speed in getting that done, there has not been until recently as much energy put into restructuring the operations of the city. Functionally, the city operationally was broke, and that’s evident in that it’s service delivery insolvent. I believe the emergency manager had to pick one of two options. The focus was on delivering not fixing the operations. That as one way the speed cut against necessary, long-term things which will now have to be accomplished outside of the bankruptcy which could be more difficult to achieve than inside the bankruptcy with the power of the Emergency Manager.
“The other part of that is the speed and the bilateral negotiations with the mediators. The city and the counterparties, in having all of those bilateral and none of the multiparty sorts of things, really created a win-lose situation where the parties were always coming back to the city for more and more … where as in a longer process, if there had been more time for the counterparties and stakeholders to really get and understanding of the city’s needs to fund investment going forward and what its real cash flows were, I think we would have been able to reach settlements where maybe we weren’t as close on that continuum of feasibility as we are today.”
Kopacz says the city’s Plan of Adjustment is “feasible” with “reasonable” financial projections. But she has not yet been able to fully review the latest draft Plan, filed yesterday with updated projections after recent settlements and additional revenue sources including parking revenue. Kopacz said she reviewed the 10- and 40-year projections, provided by city consultants but had not yet analyzed the restructuring and reinvestment initiatives (which total about $1.7 billion) and the triennial budget, provided by city staff.
Her overall analysis of the Plan of Adjustment included “quantitative and qualitative” work, that evaluated whether the city had the “skill and will” to implement the plan.
Rhodes questioned whether the city’s plan to issue $632 million in B notes, payable over 30 years with interest-only payments for the first decade, was reasonable. Kopacz said she believed the city could repay those.
To reflect its settlement with bond insurer Financial Guaranty Insurance Co., the city of Detroit filed an updated Plan of Adjustment today. It’s a draft, so it will be updated before the confirmation hearing ends next week.
Today’s testimony includes witnesses who will shed light on the city’s settlement deal with Financial Guaranty Insurance Co., which includes a development agreement for the Joe Louis Arena site, as well as other settlements.
Court is done for the day. The bankruptcy trial resumes tomorrow with testimony from the court-appointed expert witness. Her initial report can be found here. She’ll discuss the feasibility of the plan’s financial and administrative assumptions.
Judge Steven Rhodes as Emergency Manager Kevyn Orr the value of the development agreement that’s part of the city’s settlement with FGIC.
Orr first said he wasn’t sure he could answer without violating the confidentiality requirements related to the case’s mediations.
“Ultimately I’d like you to testify either what the value of the real estate is FGIC has an option to acquire here or tell me the city doesn’t think it’s necessary for the court to have that to determine the reasonableness of the settlement. If your answer is that, then we have to have a discussion about why that would be,” Rhodes said.
The court took a break for Orr to consult with the city’s attorneys.
When his testimony resumed, he said, “The Development Agreement is related to the invalidity litigation (for the Certificates of Participation pension financing), and right now that property has no current value or even negotiated value because it has to be demolished and remediated before it can be developed,” Orr said.
Judge Rhodes replied, “Just to translate that into slightly different language, the city’s position is that the costs associated with attempting to market all of that property either equals or exceeds what the city could sell it for in the market?”
“Yes,” Orr said, “Because you have to demolish it. You have to remediate it, so that’s true, your Honor,” Orr said.
As part of the bankruptcy financial restructuring, the city of Detroit is contracting with Hilco Industrial company to sell some city vehicles and equipment.
In his testimony this morning, Detroit Emergency Manager Kevyn Orr said the list includes buses, trailers, pick up trucks, cargo vans, floor scrubbers, sweepers, a dump truck, a crane, a backhoe, a surface grader and other items from several city department.
He did not testify about how the sale would proceed.
Orr said the deal the city reached with bond insurer FGIC is a “global settlement,” in part because it resolves litigation involving the pension Certificates of Participation and avoids future litigation.
“We are resolving some fairly heated litigation with FGIC over some large sums of money,” Orr said.
Provisions in the settlement prevent litigation between FGIC and other parties, including the pension systems, involved in the deals.
“We’re trying to provide finality in all of our agreements and transactions if we want ot be a good development partner with FGIC. We do not want any third parties to be embroiled in litigation,” Orr said. “Rather than buying more litigation going forward, we’re trying to bring and end to all of that potential at this point and go forward, focusing more on the upside, the sustainable and economic development of the agreement going forward.”
Orr now is testifying about FGIC’s involvement with the city’s Certificates of Participation pension financing. FGIC insured about $1.1 billion worth of the deal. In a January lawsuit, Orr challenged the legality of the deal, which allowed the city to borrow money for pension financing above the legal debt threshold.
Under questioning from city attorney, Greg Shumaker, of Jones Day, Orr said the bankruptcy settlement with FGIC means the city will drop its suit, saving the city substantial legal fees. “This was going to take at least several years,” Orr said. “I anticipated that it was going to be complex, both factually and legally, under some of the theories for several reasons. One, it was pretty clear that both parties were going to be killing a lot of trees in terms of throwing a lot of paper back at each other. I’m familiar with the counsel representing FGIC. … They’re quite capable. They will represent their client zealously within the bounds of the law.”
If FGIC had prevailed in the suit, Orr said, the bond insurer could have had a claim to pension funding.
“It would have been fairly catastrophic,” if FGIC had won the case, Orr said.
Detroit Emergency Manager Kevyn Orr is back on the witness stand, describing how the FGIC settlement came about following mediation discussions. “They began in earnest a week or so after the Syncora settlement and picked up speed the last three weeks or so,” Orr said. The federal mediators, including Chief U.S. District Judge Gerald Rosen, were involved, as well as Mayor Mike Duggan.
“I made a pledge, which I wanted to keep, with the mayor to work with him and his team to go through an effective transition,” Orr said. “I felt I no longer had the authority under the statute to deal with city property, but I felt as a matter of prudence, it was important to have the mayor’s team involved.”
Gov. Rick Snyder’s controversial staff member, Richard Baird, also was at the table, Orr said, because the city did not have much left to offer the bond insurer in a settlement on their $1.1 billion claim.
“It became clear that something of that value as going to have to be in-kind as opposed to debt or cash, and we were going to need the state to provide certain kinds of programs,” Orr said.
Also new in the city’s restructuring plan, Malhotra testified that the city could reap $5 million next year from selling 13.5 million pounds of copper wire — $25 million over six years — as the public lighting department is decommissioned. “It’s the wire that exists both overhead and underground,” Malhotra said.
Judge Rhodes asked Malhotra about the $55 million he’s being asked to approve in exit financing, as part of the city’s Plan of Adjustment, and whether the city would actually pay that when it emerges from Chapter 9.
“Based on all the discussion I’ve had with the CFO of the city (John Hill), the $55 million is being paid off (to Limited Tax General Obligation Bond holders) at the exit,” Malhotra said.
Judge Rhodes then asked, “Do you have an opinion about whether that payment of $55 million instead of bonds is in the city’s better interest?”
Malhotra said paying it off over time, through bonds, would cost the city more because of interest that would be attached to that. “In my view at least, the city has the capacity under its proposed exit financing to pay off the $55 million,” he said.
“It’s debt versus debt.”
During his testimony, financial consultant Gaurav Malhotra reviewed the city’s Plan of Adjustment’s $632 million in new “B Notes” to be issued to creditors. Here’s the distribution of those settlements:
$493 million to Other Post-Employment Benefits for Retirees (health care, for example) -
$74 million to FGIC – 12 percent of total
$23.5 million to Syncora – 4 percent of total
$17.3 million to Limited Tax General Obligation Bondholders – 3 percent of total
$3.7 million to Downtown Development Authority – 1 percent of total
$21 million to other unsecured creditors – 3 percent of total
The B Notes will be held by OPEB, the COPs holders and other unsecured creditors. Interest will be 4 percent for first two decades, growing to 6 percent for the last decade. They are interest-only for the first 10 years.
Gaurav Malhotra, a consultant with Ernst & Young, is reviewing some of the terms of the FGIC settlement. He says the New York-based bond insurer’s recovery is 13 percent, including $141 million in new notes and $20 million in “settlement credits.”
With additional settlements reached with the city’s creditors, Gaurav Malhotra is on the witness stand. Again. (He appeared at Day 12 of the trial.) Malhotra is principal and senior managing director in the restructuring practice at Ernst & Young in Chicago. His initial role when he began working with Detroit three years ago was to assess the city’s short-term cash flow situation. In Spring 2013, Ernst & Young’s role changed to look at longer-term financial projections for the city.
After today’s first witnesses finished testifying, Judge Steven Rhodes addressed city attorney Bruce Bennett, of the Jones Day law firm, who will be making the closing argument next week.
Here’s what Rhodes told Bennett he wants to hear at that time:
“I asked parties, counsel, to brief the meaning and operation of Section 943 (b) 3 of the Bankruptcy Code. This is the section that deals with the reasonableness of fees and how this works in this context. So I want you to be fully prepared to discuss that section with me and how it can work here.
“I need to know specifically which settlements the city is asking the court to approve and whether approval of exit financing is part of the city’s request at that stage also, and I’d like you to spend as much time as you think is necessary on the issue of the justification for the discrimination among the classes of unsecured creditors.
“At the same time, however, while you do that, I want to indicate to you that I’m less concerned about the numerator and denominator than I am about the business side, the business justification side of that analysis.
“If anything further occurs to me in the meantime, I’ll try to let you know.
Parking consultant Gerald Salzman testified about various models of ownership for the city’s parking “assets” — garages and metered spaces. A few highlights:
*Four models were considered, some of which included privatization.
*An additional 370 meters are possible.
*Revenues will decline after 2018 when the Joe Louis Arena garage is transferred to bond insurer FGIC or its developer.
Here are the seven city-owned parking garages, their addresses and their capacity:
Ford Underground, 30 E. Jefferson, 723 spaces
Grand Circus, 1600-1601 Woodward Ave., 821 spaces
Joe Louis Arena, 900 W. Jefferson Ave., 3,200 spaces
Millenium, 432 W. Congress St., 595 spaces
Premier Underground, 1206-1208 Woodward Ave., 895 spaces
Eastern Market, 2727 Riopelle St., 300 spaces
Cultural Center, 41 Farnsworth St., 350 spaces.
Meanwhile, The Detroit News’s Robert Snell is reporting one more financial group is close to a deal. The COPs holders are the parties that own the Certificates of Participation issued in the now-infamous pension debt financing deal.
ALERT: COPS holders’ lawyer expects to sign off on #Detroit’s bankruptcy deal with bond insurer FGIC within 48 hours.
— Robert Snell (@RobertSnell_DN) October 21, 2014
The first witness is Gerald Salzman, who works for Desman Associates, a parking and transportation consulting company that examined Detroit’s garages.
A team of 10 engineers did a conditional assessment in the city’s parking garages, examining the concrete’s condition, structural integrity and other features, Salzman said. On the financial side, Desman developed a financial model based on data from the city and their own verification based on inventory, occupancy counts of cars in the garages
Laura speaks with Crain’s Detroit Business Reporter and Editor of the new “Detroit 2.0″ special section, Amy Haimerl, about the future of Detroit finances and business. They discuss the “Big Bet on Detroit,” and according to Haimerl there are several. As the city works through this financial crisis, Haimerl says the first big bet is the partnership between Michigan’s Republican Governor Rick Snyder and Detroit’s Democratic Mayor Mike Duggan to revitalize the city in the post-bankruptcy era.
Judge Rhodes updated the remaining trial schedule:
The city will present a handful of witnesses to substantiate the FGIC settlement tomorrow. Then Wednesday, the court’s expert witness will be on the stand.
Closing arguments will be next week.
Judge Rhodes will announce his opinion on plan confirmation the week of Nov. 3
Rhodes’s disbelief relates to the committee’s lack of “sign off” on the agreements reached for the 330 library retirees and six from Cobo Hall that now allow their inclusion in the general retirement system and the new health care “VEBAs” – Voluntary Employee Benefit Associations – which will administer retiree health care instead of the cit.
Alberts told the judge there is a 1:30 p.m. mediation session today.
“I don’t want an explanation,” Rhodes told him. “I want you to resolve it now.”
City attorney Heather Lennox, of the Jones Day firm, told Rhodes there would be an updated Plan of Adjustment filed reflecting the “FGIC” settlement last week and the new agreements for the library and Cobo Hall retirees.
“I don’t think the language in the plan is going to change. That’s what we’ve been negotiating, but the issue that is coming up is an issue that is beyond the scope of the plan. It involves what benefits will be provided by the VEBA trust, and that’s not something the city decides,” Lennox said.
This week’s announcement that Financial Guaranty Insurance Co. had settled its $1.4 billion claim with the city as part of the bankruptcy case was, obviously, big news. Here’s a roundup of what a variety of media outlets broadcast and published about it.
Bloomberg’s Steven Church (based in Delaware) and Chris Christoff (based in Lansing) teamed up for a highly readable piece focused on the finances of the deal. They write:
Requiring creditors to invest more in the city is at least rare, and may be unprecedented in a municipal bankruptcy, attorney James E. Spiotto said in an interview. The deal resembles a corporate restructuring, he said. “To some degree it’s a lot like Chapter 11, where they are giving them a chance to buy equity in the debtor,” Spiotto said. “They have to put something into it to get something out.”
The Detroit News’ business columnist Daniel Howes analyzed the deal as moving the creditors from cash payouts to investments in the future of the city. Indeed there has been courtroom rhetoric about “adversaries becoming partners” with the city over the course of the trial, the adversaries being FGIC and bond insurer Syncora, which settled last month in a similar deal. Howes writes:
The city’s deal with its last major holdout creditor yokes another adversary — and its capital — to revitalization of the city, turning a tough bond insurer into the kind of investor Detroit needs. The agreement, reached early Thursday, gives Financial Guaranty Insurance Co. options to acquire Joe Louis Arena, its adjacent parking deck and allows it to enter into a development agreement culminating in a riverfront hotel, retail and condos. Not a bad turn for the largest city in American history to go bankrupt: a creditor into the city for more than $1 billion, its leaders desperate to recoup their losses, gets a prime, strings-attached tract overlooking an international border.
Meanwhile, speaking of development, the Detroit City Council and Mayor Mike Duggan disagree about a proposed city ordinance that would require community involvement in projects that receive tax breaks or other city subsidies. In a Detroit Free Press piece today, city hall reporter Joe Guillen writes:
The proposed law, backed by City Council President Brenda Jones, aims to make sure Detroiters have access to jobs and other benefits associated with new developments. Community leaders already have collected 2,500 signatures in support of the law, Jones said. But Mayor Mike Duggan’s administration on Thursday joined critics in the business community in opposing the ordinance. “We absolutely believe every developer, every company should deliver a community benefit,” said Duggan’s chief of staff, Alexis Wiley. “But this ordinance is not the right answer.”
After negotiations lasted until the wee hours of the morning, the city today filed its proposed agreement with bond insurer Financial Guaranty Insurance Co. in the bankruptcy case. The full document is below. Here are a few highlights:
*A development agreement would mean FGIC or its developer partner would build “mixed-use facility” on the site of Joe Louis Arena after it is torn down in 2017. The development would include at least 300 hotel rooms and office, retail, commercial and residential space. Buildings would not be higher than 30 floors.
*Detroit Emergency Manager Kevyn Orr will ask the city council to approve the deal by early next week. If the council doesn’t approve it, Orr could ask the State Emergency Loan Board for approval.
*The agreement means the city’s litigation challenging the legality of a 2005 pension funding deal is dropped.
*The city will demolish “the Joe” and remediate the site. The state will pay $6 million toward those cots and expenses.
*The state will reimburse the developer up to $4 million in incentives from the Michigan Strategic Fund, in cooperation with the Michigan Economic Development Corp. and $14 million from the Michigan Strategic Fund’s Brownfield Tax Increment Financing Program.
*The city will change the zoning on the site to permit a mixed-use development. The city will approve the site plans.
* To settle FGIC’s debt on the interest rate swap deal for pension funds, FGIC will receive $39.7 million, partially in B notes already in the city’s Plan of Adjustment, partially in money from the Downtown Detroit Development Authority. Another $4.5 million paid to FGIC will come from other funds in the swap claim.
*FGIC will receive about $67.2 million in new C notes. Bond insurer Syncora, in a deal announced last month, received about $23.5 million in those funds. City attorney Corrine Ball said the C note payments represented the relative share of each insurer’s claim in the pension fund insurance: Syncora at about $400 million, FGIC at about $1.1 billion.
*About $19.7 million in “settlement credits,” also offered to Syncora, will be available for FGIC to use as vouchers toward future purchases of city assets. The funds could be used toward 50 percent of any purchase price.