• House Passes 11 Detroit Bankruptcy Bills: See the bills and voting results

    The Michigan House today passed a $195 million financial aid package for Detroit’s pensions as part of the city’s ongoing work to emerge from bankruptcy. Some of the 11 bills create state oversight of the fiscally challenged city, another prevents the Detroit Institute of Arts from renewing its millage, worth $23 million of the museum’s $31 million annual unrestricted revenues, when it expires in 8 years.

    Below are descriptions of the 11 bills and their vote totals in the Michigan House of Representatives today. The bills now move to the Senate.

    Meanwhile, here’s The Detroit News’s story about the votes. The Detroit Free Press published this piece.


    Detroit Emergency Manager Kevyn Orr released a statement:

    “I sincerely thank the members of the Michigan House of Representatives for working swiftly, and in a bipartisan fashion, to pass legislation which is critical to Detroit’s efforts to get back on firm financial footing. The State of Michigan’s willingness to participate in a negotiated settlement that will limit financial impact to the City’s two pension funds and protect the city-owned treasures at the Detroit Institute of Arts is a critical component to the City’s proposed Plan of Adjustment. The State settlement also provides additional security to the City and its residents by creating a level of accountability designed to keep Detroit fiscally strong decades into the future. The State of Michigan is part of an unprecedented effort of private, philanthropic, labor and public support designed to lessen the financial impact to city retirees while ensuring the City has the resources it needs to reinvest in services for all of its residents.”

    Gov. Rick Snyder issued a statement about the House action, which reads, in part, “This settlement will allow us to more quickly resolve the bankruptcy issues, and create a solid, sustainable fiscal foundation to support Detroit’s continuing turnaround. This is essential for the city’s 700,000 residents, who are seeing improved vital services and quality of life. But these efforts are about helping all of our state. Detroit is an important part of Michigan’s identity.”

    Here are the bills, with links to their details and sponsors.

    House Bill 5566: Passed 103-7. Dubbed “The Oversight Commission Act,” this measure creates a nine-member panel to oversee Detroit’s fiscal operations including its finances, budgets, contracts, collective bargaining agreements, debt issuance and revenue estimates. The original legislation was amended to include a City Council appointment. Introduced by Rep. John Walsh (R-Livonia).

    House Bill 5567: Passed 105-7. Detroit would be required to hire a Chief Financial Officer to manage day-to-day operations. Introduced by Rep. John Kivela, (D-Marquette).

    House Bill 5568: Passed 85-25. This bill would require Detroit to transition new city employees from a traditional pension program to a defined contribution plan (401k) and prohibit the city from providing retirement and health care benefits greater than what state employees have available. Introduced by Rep. Gail Haines, (R-Waterford Township).

    House Bill 5569: Passed 100-10. This bill would prohibit Detroit from opting out of the required 80/20 split (employer/employee) for health care premium payments. Introduced by Rep. Andrea LaFontaine, (R-Columbus Township).

    House Bill 5570: Passed 105-5. This bill creates an Investment Committee make recommendations to pension fund boards and requires reports about travel and related expenses paid for by pension systems. Introduced byRep. Ken Yonker (R-Caledonia).

     House Bill 5571: Passed 66-44. The Detroit Institute of Arts is prevented from extending its current millage or having a new one under this measure. Introduced by Rep. Ken Goike (R-Ray Township).

    House Bill 5572: Passed 75-35. This is the legislation that proposes taking $194.8 million from the state’s “rainy day fund” for appropriation to Detroit. Using an interest rate of 6.75 percent, the $194.8 represents the present value of the$350 million for Detroit that Gov. Rick Snyder had proposed.  Introduced by Rep. John Olumba (D-Detroit).

    House Bill 5573: Passed 77-33. To pay back the $194.8 million appropriated in HB 5572, this bill dedicates $17.5 million annually from the state’s tobacco settlement fund. Introduced by Rep. Alberta Tinsley-Talabi (D-Detroit).

    House Bill 5574: Passed 74-36. This legislation enables the Michigan Settlement Authority to receive the $194.8 million. Introduced by Rep. Thomas Stallworth (D-Detroit).

    House Bill 5575: Passsed 75-35. Under this measure, the Michigan Settlement Administration Authority would be created to ensure the criteria are met for the state’s $194.8 million. Introduced by Rep. Fred Durhal (D-Detroit).

    House Bill 5576: Pased 98-12.Binding arbitration for police and fire would be subject to approval from the Oversight Commission. Introduced by Rep. Joseph Haveman, (R-Holland).

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org


  • From Lansing: Watch live as House considers bankruptcy bills

    We’re expecting a vote today on the 11 bills related to Detroit financing and oversight.

    Here’s the live stream of the Michigan House of Representatives session today.
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  • The DIA on the DIA bill: Why voters, not legislators, should decide the future of the museum’s millage

    Among the 11 bills passed today by the Michigan House Committee on Detroit’s Recovery and Michigan’s Future was HB 5571, a measure that prevents the Detroit Institute of Arts from renewing its existing millage. That’s the 0.2-mill property tax, levied in Macomb, Oakland and Wayne Counties. It provides about $23 million annually, about 70 percent of the museum’s operating budget, and is set to expire in 2022.

    The DIA, judging by the statement it released this evening, is not happy. “Whether or not the local communities and the DIA return to those voters upon the expiration of that tax should be decided by the voters, not by Michigan House members who are surprisingly willing to limit the citizens’ right to decide,” the statement read, in part. (The full text appears below.)

    As part of the bankruptcy’s “Grand Bargain,” the museum has committed to providing $100 million for the city’s underfunded pensions in exchange for protection of the museum’s artwork from sale to pay creditors. Other terms of the proposed Grand Bargain, as detailed in the city’s court filings, include $350 million (over 20 years) of state money and $366 million of foundation funds going to help fund pensions. All the funding is dependent on a “yes” vote from the city’s retirees on the city’s post-bankruptcy financial and organization plan. The state funds, now proposed to be a one-time payment of about $195 million, are provided for in the package of bills passed out of committee today.

    Like the city of Detroit, the museum has seen its level of state funding reduced over the last few decades. In 1990, the museum received about $16 million in state funding, but that fell to nothing by 2012, the year the millage passed. Mark Stryker, who covers the DIA for the Detroit Free Press, authored a comprehensive history of the museum in a September 2013 report titled “DIA in peril: A look at the museum’s long, tangled relationship with Detroit politics and finances.”

     Here’s the full text of the museum’s statement: 

    As a partner in the “Grand Bargain,” the Detroit Institute of Arts (DIA) is pleased that the Detroit’s Recovery and Michigan’s Future Committee of the Michigan House has passed the legislation needed to ensure state financial support. Today’s vote is a strong statement that the future of Michigan’s largest city is important to all state residents and the DIA is pleased and proud to be a part of the solution to Detroit’s fiscal crisis. We are, however, deeply concerned at the move by some House members to deny Michigan residents their right to vote. In August 2012, thousands of individuals in Macomb, Oakland and Wayne counties voted to approve a property tax to support operations at the DIA. Whether or not the local communities and the DIA return to those voters upon the expiration of that tax should be decided by the voters, not by Michigan House members who are surprisingly willing to limit the citizens’ right to decide. House Bill 5571 prohibits voters from deciding whether to support continued funding for arts services from the DIA, and will place similar limitations on other museums across the state that are not “municipally owned.”   House Bill 5571 has nothing to do with the Grand Bargain. The Detroit Institute of Arts looks forward to continuing its work in support of the Grand Bargain and Detroit’s revitalization.

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org

    By in DIA, Pensions, WDET
  • MiWeek: DPTV’s team talks Detroit

    Detroit’s bankruptcy and the “Grand Bargain” have taken center stage in Lansing, and creditors are still looking to the Detroit Institute of Arts collection for compensation. Michigan voters were polled about what they really think about the bankruptcy — and their answers might surprise you.

  • Detroit Free Press: Retirees wanted art sold

    Some of Detroit’s major creditors, including retirees, almost agreed to try to attempt a forced sale of the Detroit Institute of Arts collection last year, the Detroit Free Press reports. The deal didn’t happen because:

    …a pledge of millions from the state persuaded retirees to abandon the plan, according to interviews and confidential documents obtained by the Free Press. The proposed deal collapsed after bankruptcy mediator Gerald Rosen assembled pledges from nonprofit foundations and Gov. Rick Snyder to help reduce pension cuts and preserve the DIA.

    The story is significant, in part, because it shows first, how close pensioners and the city were to a fight in court over one of the city’s biggest financial and cultural assets: the museum’s collection. Second, it reflects the ongoing success of Chief U.S. District Judge Rosen as the Chapter 9 case’s chief mediator who has held a series of confidential talks and helped orchestrate the “grand bargain”.

    Rosen has been bringing parties to the table, forging agreements between several employee/retiree groups, financial creditors and the city. The case is far from a done deal — several bond insurers and banks have not reached agreements and stand to lose billions, and the fate of the Detroit Water and Sewerage Department is uncertain.

    But as the case progresses toward a July confirmation hearing and legislators grapple with a package of bills for funding and oversight of the city, it’s clear what’s not in the daily headlines may be just as significant as what is.


  • Creditors’ Motion Denied: DIA art will stay on the walls

    Bankruptcy Judge Steven Rhodes denied a motion filed by creditors to let them inspect artwork at the Detroit Institute of Arts.

    Syncora and Financial Guaranty Insurance Company stand to lose more than $1 billion in Detroit’s bankruptcy case. They said in court filings they wanted to get an accurate appraisal of the DIA collection, in part, because they had lined up potential buyers for some of the collection. They also wanted more documents from the museum that would help them accurately assess the value of the artwork, and their attorneys argued their cases this morning.

    Judge Rhodes issued his opinion from the bench this afternoon. Here’s what he said:

    “The record does not establish any cause to grant this motion as to documents. There are the usual document production mechanisms that are not only available but have been utilized by these very creditors in the case, and the court and the rules have a preference for the use of those procedures. … There is no cause to grant his motion as a broad category of documents while the parties are attempting to work it out.

    “As to art that is on the walls that the movant parties seek authorization of permission to remove, there isn’t anything the court concludes that the record reflects to justify this extraordinary relief. It just doesn’t appear in the record that it is necessary to remove art from the walls and give parties an opportunity to inspect the reverse sides of art to accomplish any purpose that’s related to their objections to plan confirmation. The record doesn’t justify a finding that that’s needed. Rather the record establishes that the access that parties have simply by going to the museum like everyone else to look at and inspect the art is sufficient for the purposes that the movant parties assert here.

    “Apart from this of course is the issues of the risk to the art that would result from granting the relief that these movant parties seek here. The record establishes that this is a substantial risk and not one that should be undertaken lightly or in the sense of extraordinary cause, and in the absence of such cause here the court denies his relief as well.

    “Finally as to the other access to art which is not on public display. The court understand that the DIA is willing to allow that access on reasonable terms and there is no reason that can’t be worked out between the movant parties and the DIA. The record does not establish any cause for the court to get involved at this stage. Once again, however if there is a dispute about the terms of the context of access, the court is certainly available to resolve any such disputes even on an informal, telephone basis.

    “Therefore, the motion is denied, and the court will prepare an order.”

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org


  • Today in Bankruptcy Court: Getting at the DIA collection

    It’s a busy day in bankruptcy court, with Judge Steven Rhodes considering several items. I’ll post about them as they happen today.

    First up was the motion by two bond insurers, who collectively stand to lose about $1 billion under the city’s current financial plans. They want to examine the Detroit Institute of Arts collection with the goal of appraising it. The bond insurers, Syncora and Financial Guaranty Insurance Company, say they have buyers for the collection and the sale of it would help offset some of the city’s debt.

    Minutes after the attorneys for the bond insurers, the DIA and the city finished their arguments, The Detroit News’s Robert Snell filed this story.

    Judge Rhodes will rule after lunch on the bond insurers’ motion.

    The morning discussion also included Judge Rhodes asking the attorneys the same question Craig Fahle asked me this morning on our weekly segment on his show: Why does the art need to come off the wall for inspection? Like me, the attorneys couldn’t really answer that question. Here’s part of the exchange, with a bit of paraphrasing but mainly direct quotes:

    Judge Rhodes: The DIA is concerned about the potential and the risk of damage to the art (if it’s taken off the wall or otherwise moved).

    Attorney Alfredo Perez for bond insurer FGIC: Your honor, that is an absolutely valid concern. We are prepared to work with any reasonable restrictions on that. I think that is really a red herring.

    Judge Rhodes: I’m not sure the DIA would agree…

    Attorney Perez: These are all very responsible people. These are people in the business. … They would be able to satisfy any reasonable concerns the DIA would have.

    Judge: So why is it that removal from the walls is necessary to accomplish your goal here?

    Attorney Perez: We went back to the bidder, and they indicated that in order to determine the authenticity they really would have to inspect it.

    Judge Rhodes: Is there doubt about the authenticity?

    Attorney Perez: I don’t think so.

    Judge Rhodes: Then why is it necessary?

    Attorney Perez: This would be subject to negotiation. We were told the reason it was necessary is that in order to appraise it in a way to make a firm bid, you really have to inspect it.

    -By WDET’s Sandra Svoboda

    @WDETSandra and nextchapter@wdet.org

  • Freep: Detroit’s “Grand Bargain” could include Big Three money

    The “grand bargain” deal to to help fund Detroit’s pensions and protect the Detroit Institute of Arts’ collection from sale to pay creditors has three provisions: an appropriation from state, $366 million from private foundations and $100 million from the museum.

    The Detroit Free Press today is reporting where some of that $100 million could come from: the Big Three automakers.

    The DIA approached the auto companies about six weeks ago to ask them to contribute more than $50 million as a group, one person familiar with the talks said. The total donation for the three may end up closer to half that amount, said the source.

    The Freep reports that two sources told reporters that the deal could be as close as a week away.


    By in DIA, Pensions