The Michigan Senate today passed a $195 million financial aid package for Detroit’s pensions as part of the bankruptcy’s “Grand Bargain.” The Senate also approved bills that create state oversight of Detroit’s operations by requiring committees to monitor the city’s finances and pension investments as well as the establishing a chief financial officer position within city government.
Prior to the full Senate vote, the chamber’s Committee on Government Operations, approved the bills. Chaired by Senate Majority Leader Randy Richardville, the committee declined to send to the full Senate a bill that would have prevented the Detroit Institute of Arts from renewing its millage. That measure, approved in 2012 by voters in Macomb, Oakland and Wayne counties is worth $23 million of the museum’s $31 million annual unrestricted revenues.
The Legislature’s passage — and governor’s expected signature — means finalization of the “grand bargain” is in the hands of the city’s pensioners. The state money and the $466 million in pledges from private foundations and the Detroit Institute of Arts is dependent on a favorable vote from both general and police/fire groups in ongoing balloting. Votes are due back in July.
“Today we are all Detroiters and we are all Michiganians,” said U.S District Court Judge Gerald Rosen following the vote. Rosen has been overseeing talks between Detroit and its creditors, and is considered the architect of the “grand bargain.”
It’s an exceptional effort from a Legislature that’s too often fractious. It’s also a vote of confidence, not only from lawmakers, but Michiganders across the state, who consistently told pollsters that they support grand bargain — the $816-million deal (comprising funds pledged by the state, philanthropic foundations and the DIA itself).
Gov. Snyder issued a statement shortly after the votes, saying, in part, “…we saw lawmakers from across the state stepping up to approve legislation that helps Detroiters – and all Michiganders. This settlement plan will allow Detroit to build a solid fiscal foundation for its continuing comeback. The bipartisan package shows the commitment of our partners in the Legislature to assist Detroit pensioners, ultimately save taxpayers millions of dollars and improve the quality of life for the city’s 700,000 residents.”
Below are descriptions of the bills, their sponsors, their vote totals in the Michigan Senate today and their votes in the Michigan House May 22.. The bills now head to Gov. Rick Snyder for signature.
House Bill 5566: Passed 36-2. (It passed the House 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 5568: Passed 24-14. (It passed the House 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 36-2. (It passed the House 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 37-1. (It passed the House 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 by Rep. Ken Yonker (R-Caledonia).
House Bill 5573: Passed 21-17. (It passed the House 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 5575: Passed 21-17. (It passed the House 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: Passed 37-1. (It passed the House 98-12.) Binding arbitration for police and fire would be subject to approval from the Oversight Commission. Introduced by Rep. Joseph Haveman, (R-Holland).
The Senate Committee declined to pass two of the 11 bills out of committee. They were:
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).
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org
Of course we never know what any of the speakers might spontaneously say about Detroit’s bankruptcy, but following are a few of the sessions where we expect issues related to the Chapter 9 to be front and center.
WDET will be following the conference at this link.
Detroit Public Television is broadcasting live for much of the conference and can be viewed here.
The first full day of the conference is largely focused on entrepreneurship, but two sessions promise some specific Detroit mentions:
1 p.m. Gov. Rick Snyder speaks as part of official “conference welcome.”
4:45 p.m. Detroit Mayor Mike Duggan will be interviewed by Detroit Free Press columnist Rochelle Riley. DPTV is hosting an online screening and chat during his appearance with Next Chapter Detroit’s Sandra Svoboda as a panelist.
The second day centers on STEM – science, technology, engineering, math – but we’re watching and listening for Detroit bankruptcy topics primarily in the following sessions:
9:30 a.m. Author Malcom Gladwell gives a keynote address and is interviewed by Detroit News columnist Daniel Howes, who has written extensively about the Detroit bankruptcy. As Gladwell’s writing pushes a message of how entrepreneurship and education can help overcome obstacles, he’ll explain how these lessons can apply to Detroit as well as the entire state.
2:45 p.m. Gov. Rick Snyder will be interviewed by Vickie Thomas, WWJ city beat reporter, and is expected to review the highlights of his administration.
5 p.m. WDIV and The Detroit News conducted a survey for the Mackinac Policy Conference, and the results will be discussed at a town hall meeting. They include the statewide view of Detroit as well as attitudes and opinions about this year’s political races and policy issues.
This is the bankruptcy day with several sessions and speakers focused on the topic:
8:55 a.m. New Orleans Mayor Mitch Landrieu, interviewed by WDET’s Craig Fahle, will explain how rebuilding from natural disasters transformed the Crescent City and how lessons learned there could help Detroit’s revitalization.
9:40 a.m. Detroit Emergency Manager Kevyn Orr will be interviewed by Vicki Mabrey, former ABC News correspondent. He’s expected to discuss how Detroit is being positioned for success post bankruptcy and what his plans are toward the city’s long-term sustainability.
10:15 a.m. The panel titled “Detroit Next: Positioned for the Future,” will be moderated by Detroit Free Press editorial page editor Stephen Henderson. Speakers include Detroit City Council president Brenda Jones, Kresge Foundation CEO Rip Rapson, and Jase Bolger, Michigan speaker of the house, and others who will address how “bankruptcy is positioning Detroit to establish financial stability and sustainability and redirect its efforts in city development. With a newly elected mayor and city council in place to guide the city through the post-bankruptcy phase, Detroit offers an environment for unprecedented innovation and collaboration.”
Here’s the link to the full agenda.
The map above shows that most of Detroit’s non-uniform retirees live in Detroit, but the rest of them remaining in Michigan live throughout the state.
Using the data the Detroit Retired City Employees Association provided to the Michigan House Committee on Detroit’s Recovery and Michigan’s Future, Next Chapter Detroit mapped the zip codes where the retirees live. (The data did not include retired police or fire fighters nor retirees who live out of state. That’s below.) The highest concentrations of retirees live in northwest Detroit.
One of the furthest zip codes away that have a city retiree was in 49950, Mohawk, Mich., with one retiree. That’s 9.5 hours away from Detroit.
Shirley Lightsey, the president of the DRCEA, a voluntary membership organization that represents all retired city workers, testified before the committee May 15 in favor of the 11-bill package that provides $195 million in funding and oversight provisions for Detroit.
Here’s the map of where retired Detroit police officers and firefighters live:
The Detroit Journalism Cooperative wanted to know what voters outside of Detroit think about the state proposals to support the city’s pensioners and protect the Detroit Institute of Arts collection as part of the bankruptcy case. So we asked them in an EPIC-MRA poll, commissioned by the DJC with support from Renaissance Journalism through a grant from the Ford Foundation. We sought to measure how voters outside Detroit think about the city, and whether they back a state financial contribution to help Detroit emerge from the largest municipal bankruptcy in U.S. history.
What did they say? Below is a round up of all the partner coverage of the poll results.
The results are especially timely as today in Lansing legislators begin taking testimony and considering a 10-bill package to providing funding for and oversight of the city.
From Bridge Magazine:
Michigan voters, including Republicans and those who live far from bankrupt Detroit, want the state to provide financial support to its largest city as part of a “grand bargain,” according to a statewide poll. What’s more, voters across the political spectrum said they would not hold a vote in support of Detroit financial aid against their own elected representatives. The findings come as lawmakers in Lansing debate a $350 million funding package for Detroit that critics deride as unwise and unfair to other struggling Michigan communities.
From Michigan Radio:
A new poll shows Michigan voters outside of Detroit approve using state money to support the so-called “Grand Bargain” to bolster City of Detroit retirees’ pensions and protect the Detroit Institute of Arts’ collection. It found almost half of voters outside the city of Detroit support the state government contributing $350 million to help solve some of the sticky issues of the bankruptcy. Forty-nine percent favor the contribution, 34 percent oppose it.
People like the plan better when they learn that the $350 million would go to bolster the retirees’ pension funds and protect the Detroit Institute of Art from having to auction off part of its collection.
Bernie Porn is with EPIC-MRA, the firm that conducted the poll. He says after you boil it down, when people know the money goes to retirees and to help the art museum, more people approve. “When you do that, you end up with 62% support for the proposal and that includes 74% of Democrats, 58 percent of Republicans, and then only 51 percent of independents,” Porn explained.
From WDET Radio:
Voters want state money earmarked for pensions, art
A new poll released today shows widespread support throughout Michigan for providing state money to Detroit especially when it’s designated for pensions or maintaining the Detroit Institute of Arts collection.
Roughly eight in ten respondents in the new poll say they view Detroit’s financial health as very important or essential to the health of the state. Nearly two-thirds of people in the survey say it’s a top priority or important for their elected officials to address Detroit’s financial recovery.
Beginning with a presentation from Detroit Emergency Manager Kevyn Orr, the Michigan House Committee on Detroit’s Recovery and Michigan’s Future on Tuesday will take up the 10-bill package that proposes appropriating state money toward the city’s pensions.
The money comes with plenty of terms, and no doubt public comments and the legislators themselves will address some of those during the hearings.
Orr is scheduled to speak at 10:30 a.m., followed by the committee’s Chair, Rep. John Walsh (R-Livonia). The committee will hear testimony about the bills beginning at 11:30 a.m. and continuing in the afternoon.
House TV is available online for live streaming of committee meetings.
Detroit Emergency Manager Kevyn Orr spoke at the American Bankruptcy Institute’s annual meeting in Washington D.C. on April 25. It was an appreciative crowd, who laughed at many of Orr’s quips throughout the speech, and gave him hearty applause at the end.
Orr, according to his spokesman, Bill Nowling, didn’t speak from prepared remarks, so Next Chapter Detroit transcribed his speech and the answers he provided to questions posed by the audience.
We skipped Orr’s “thank yous” at the very beginning of his speech and a few at the end, but here’s the rest of it, as he begins with talking about an early meeting with unspecified Michigan officials. We added some hyperlinks for reference in a few places:
“I originally got involved in this matter as part of the pitch team to receive the representation, and when we went in … we had a very frank discussion and one of the question they asked us was, ‘Do you need an Emergency Manager? Do you think we need one?’ And I sort of went off on a tirade that I thought lost us the case, I said, ‘Are you kidding me? Have you looked around this city? This is long overdue, it’s taken too long, this is a ridiculous question, and I guarantee you I will work cheek by jowl with whatever poor schmuck you get to do that job.’ They called the next day. Despite my initial answer being ‘No, I’m relatively comfortably ensconced in my petite bourgeoisie existence as a law firm partner at a large corporate law firm’ and judging from the amount of tropical weight wool and silk ties I see in the audience, I’m speaking to my brethren, I decided that it was a call to service, an obligation in a city that’s been so unique in this country’s history.
“Yes it is the Motor City, Motown, the Arsenal of Democracy, a border town, a jumping off point for the Underground Railroad. One of the first places to be occupied for over a year in the War of 1812. A city that’s been central to the history of America. But a city, for so many reasons, that have fallen down on hard times. And I haven’t spent a whole lot of time focusing on a retrospective of why, who, what, where, when, there’s enough fingers to point, there’s enough attribution, there’s enough blame. You can read that, frankly, most of the local papers, the Free Press and The Detroit News, amongst them, have chronicled Detroit’s arc to where it is now quite well. So when we came in, we’d done an analysis but one of the things that was most striking to us in this process is while the bankruptcy was filed July 18th 2013, the restructuring process had been going on for three years prior to that. This process actually started in November 2011 when the governor, Gov. Snyder, made a courageous move to say, ‘I’m going to take on Detroit. Sixty years of decline, 60 years of neglect and I’m going to take it on on my watch.’ There’s no upside here. The governor gets 2 or 3 percent of the vote from Detroit or Wayne County. It was just good work. So he began with the review team back in March 2012 that issued a report which entered into consent agreement in April 2012. Failing to meet some of the conditions of that consent agreement, a memorandum of Detroit reform was entered into in November 2012 with specific de credo obligations under that agreement that was approved in two city council votes, then-city council votes, for those provisions. Failing to meet those, another Detroit review team was empaneled in December 2012 and issued a report in March, end of February 2013, and the governor issued 22 pages findings of facts of the condition of the city. And most of you in this room have read it. $18 billion in total debt. $5.2 secured, the rest, $5.7 billion OPEB. $3.5 billion unfunded pensions obligation and liabilities, roughly $2 some odd billion in unsecured credit. 60 percent of the fires are either arson or non-emergent. Response times were low for police, 40 percent of the street lights out, 20 percent of the housing stock, 78,000 units of 320,000 units roughly blighted, abandoned, objected. If you drive through the city, certain parts of it, it looked like a shadow of the former great American city that it was.
“But the one thing that struck me of going into the city is the resilience of its people. So while the city of Detroit may be bankrupt, the people of Detroit are not. They soldier on, committed to their city with the hope that they do dream of better things and that it shall rise from the ashes, the motto of Detroit. And what struck me in that retrospective is that hopefully there’s no cause and effect behind this phenomenon but other cities that I’ve gone to have had a similar text. Out of law school I went to Miami and in 1981, some of you might remember, there were periodicals, ‘Miami’s dead,’ ‘Paradise Lost,’ ‘Crime Rampant’, race riots, fires and brimstone. It’s never going to come back. In fact, if you go to South Beach at Fifth there was still the old training center where Muhammad Ali and Angelo Dundee used to train on Fifth Avenue and Michigan and below Fifth was where the Marielitos forensic wards from Cuban prisons would stay. Crazy criminals. And everybody thought it would never come back and within a snapshot of five years it began to turn. Investment flowed into the city, 300 sunny days. Great beaches, Nice, azure blue waters. I think I want to go back. Especially when I hear about those 132 inches of snow. But the city began to grow and be seen again to thrive. From there in 2001 I came to Washington D.C. My office was at 901 E street, right now the street here, across from the FBI building. Between the 7th and 9th street corridor, you could see the buildings and storefronts that were burned out from the ‘68 riots. Shaw, U Street, Cardoza, UDC. Nobody would go. Too dangerous. And from there after … built … a stadium, the city began to revive. Now U Street, Cardoza, thriving, Condominiums, 5 million, People running at night Gentrification, Yuppification. Trendification. People coming back into a city supporting the space. Despite the prognostications that it wasn’t going happen, happening with dispatch.
New York: I met with the housing director of the city of NY a few months ago and he brought in some photos and left them in the conference room before we came in. I looked at them and said “Oh, that’s Detroit.” He said “No, that’s 135th and Lex in 1978. Here, let me show you 135th and Lex now.” Thriving. It doesn’t matter. Every city, Baltimore Inner Harbor, Pittsburgh, Three Rivers Stadium. Every city has an opportunity for a rebirth and that’s what struck me about Detroit.
“But the crushing legacy cost of debt and unfunded obligations and conduct of borrowing from the pension funds and calling it deferral, giving back 8 percent script for hundreds of millions of dollars: simply unsustainable. The fact that last year we had a city-wide surplus on a billion-dollar general fund budget of $5 million. We were bouncing paychecks and by December we were going to go below the line as far as revenue. The city would not function, and you cannot cut enough of the FTEs and services to balance the budget. The city already is underfunded. So the need was apparent. We tried initially to suggest to everyone we can do this without bankruptcy, and I received some pushback on that from some quarters that that was sophistry, that that was a little bit too ambitious to think it could be done. But what we’ve seen from just July 18th to now, even in the past three weeks is that we’ve made great momentum. Some of you have read about it, the settlement with the unlimited tax general obligation bond holders, the swaps settlement, with Judge Rhodes, a very able, a confident member of this brethren, took me to task a couple of times for putting out a deal that he thought was a little too rich, and I’ll take a beating on behalf of the city any day, but drove it down from a number of an obligation of almost $400 million to one of $76.6 million but more important than that, the interest rate on that swap obligation was being calculated on a nominal amount of $800 million. The $52 million a year that we were spending was interest only with the sword of Damocles being almost a $400 million termination fee to terminate the swap. The transformation of that settlement is to take that $76 million and make those $4.2 million a month or $50 million a principle reduction payment. So the city is paying down the debt without the risk of its casino revenue which was security interest.
“The settlements with GRS, the general retirement fund, PFRS and others and hopefully more to come as even today we’re to file yet another Plan of Adjustment. It took us from the needs that were apparent in the city and had been discussed about in volume for many, many years, to a point where we had a framework in bankruptcy to provide a structure and mediation as a process to provide a venue to resolve many questions. Some of the counterparties have representatives here, and I saw you back there somewhere in this room with us today. And let me tell you, there’s been some heavy lift, late nights, a lot of positions, some people walking out. Some people sucking their thumb, crying, all that kind of good stuff. But we’re getting it done. We’re getting it done.
“But more importantly than that, a few months ago, in November, now six months ago, I was up on Seven Mile in the McNichols area, as I drive around the city from time to time, just to get a feel for what’s going on. I want to see the lights that we’re putting on now. We’re hanging between 500 and 800 lights a week. I want to get a look at the blight, which is going to be announced a new plan next Tuesday as to how we’re going to handle and get at some of these houses. I wanted to get a look to see if the buses were running just to see if they’re running on schedule and this is why: As I’m driving by that street corner, and I’ve told this story before, there’s a little princess, she’s the age of my daughter, 6 years old, she’s got a little pink backpack on, she’s adorable, she’s waiting for the bus. She’s waiting for the city bus because we can’t afford school buses. And on that bus, which she rides with adults and older children, it’s her way to school. And if that bus is late in November when the sun goes down at 4:30, and she’s out on that bus stop by herself on a cold granite bench alone, that child is at risk. Every day. And if she has to walk from that bus stop past blighted homes, monsters live in those homes, people live in those homes. So the risk to the city is tremendous. And what we’re trying to achieve to provide an adequate level of services is for that little girl, to provide adequate pensions for the innocent bystander retirees who’ve done nothing wrong other than work for the city and expect at this point to be paid and to provide a sustainable future for the city is crucial.
“So next steps, because I know we’d like to spend some time taking a few questions. As I say, it’s part of a long, long race and we’re just now coming round the third turn and we’ve got the fourth turn and the straightaway coming up. We’ve still got a lot of lift to do because despite some of the successes that we’ve had with mediations and some of the settlements that we’ve announced, we’ve got to negotiate definitive documents. We’ve got people to sign. We’ve got to get through a planned structure where some of our counterparties haven’t agreed to anything. Some of our creditors. That’s going to be difficult, and we’ve got to get the funding in, subject to conditions, the $816 million dollars that allows us to true up some of these pensions from three different groups. We’ve got the foundation community, Ford Foundation, Kresge, Kellogg, greater southeast Michigan, others that have come in with $366 million. Knight Ridder from Florida, wasn’t really big in the Detroit area, $366 million. We’ve got the state legislature and the governor that have to appropriate $350 million and $100 million from the DIA community to give us $816 million to true up pensions. We’ve got to get that in. And we also have to come up with an exit strategy that leaves in place some post-emergence oversight which is the state of the art, the expectation, the state of law, in every other restructuring like New York’s Municipal Assistance Corporation that lasted from 1975 to 2008, 33 years. Like here in DC, the nation’s capitol, that’s got Daddy Warbucks in the form of Uncle Sam giving us a federal payment still had to have four years of a proposed balanced budget over actuals that it met before it get out from oversight from the DC control board. Likewise from Detroit that will have an obligation to keep true north.
“So let’s talk about that true north and where we’re going next. We do see a brighter future. We have a new mayor, and he is as committed, who I see every day and talk to regularly, he is as committed to turning around the city and Detroit’s renaissance as anyone. We have a city council that is actually talking and working with the mayor. They’ve even voted for some of the proposals that my office, the emergency manager’s office has proposed because it’s in the interest of the city. We have city fathers and mothers — Roger Penske, Dan Gilbert — committed to the city for years. The foundation community, a billion dollars over the past ten years to the city of Detroit coming in, and professionals, some of who I talked with this morning, about what it means to be involved. Downtown, the central core, nine square miles, we’re 97 percent leased. You can’t get an apartment in downtown Detroit now if you wanted to. We actually have had investors come in who trip over each other. We had a group of investors from China come in and they bought three buildings because the value proposition and the relatively low acquisition costs smells a whole lot like, dare I say it, Miami, Washington DC, Baltimore, Pittsburgh, and other cities that have gone through a renaissance. But that’s nine square miles in a city that’s 130 miles square. You can fit Boston, Manhattan and San Francisco in our borders. And the city has got to deliver services to all of those 139 square miles so there’s still some work to be done.
“In fact what I say to people about the efforts we’re making and the restructuring is this is almost not quite easy but long overdue and expected. It’s what we do as restructuring professionals. We pore over balance sheets, we look at assumptions, we come up with proposals and we cut deals that make sense. That’s the least of it. Because when I and my team, my core team, as someone said to me today, ‘Well, how many more professionals can you cram into a conference room?’ I said, ‘It depends is it Christmas eve or New Year’s Eve?’ but my core team is my ex law firm Jones Day, my investment bankers at Miller Buckfire, Ernst and Young, our accountants, and Conway MacKenzie, and they have been doing this work since mid 2012 and they have been stellar in the way we’ve handled ourselves. We haven’t fought. We haven’t played games. I haven’t proposed a RIF, a reduction in force, only to claw it back as a tactic. I haven’t set up deadline in terms of proposals: ‘if you don’t agree in the first five days I’ll take a quarter point off every day thereafter.’ We’ve tried to be reasonable and forthright and fair, to some people’s position a little too much so as I’ve heard from others but the important thing is we have to leave this city in a way that is able to move forward together so that it can seize this moment to rebuild a great American city.
“So what do I see? I see a city that’s already on the way to its renaissance, a city that is thriving downtown, a city that has committed folk of good faith, a city whose workforce has been remarkably patient and secure. When I first came in, there were gentlemen who showed up at city hall, the usual sobriquets, ‘ah, he’s a sell out, he’s an Uncle Tom, here’s a bag of Oreos,’ all that kind of stuff. I said ‘Hey, if you brought some milk, we could have a snack. I like Oreos, they’re quite delicious.’ And now I’m having lunch with those gentlemen, you know what they say? ‘What can we do to help? How can we pitch in? We thought you were going to be Darth Vader but you’ve proven yourself to be a reasonable guy in how you handle yourself’ and we want to take this moment to make the city better for that little princess in the pink backpack. That’s what this is all about. But I also see much effort because that core, those 700,000 residents deserve and expect services in a city that has got to resolve the blight, come through the arc and grow.
“So I’m going to speak personally just for a moment on two fronts. No. 1, it’s been a privilege for me to have this opportunity. I said I didn’t want to do it because, frankly, I was thinking about the usual stuff, what kind of toy am I going to buy, where are we going to go on vacation and how much am I funding my pension plan this year and it seemed like it was a sacrifice but I cannot tell you how much worth it it was for what we’re trying to achieve. The second thing, although I didn’t know she was going to be here but now that she is, I’d like my wife to stand up so I can say to her in front of all of you, thank you honey, thank you for being supportive, thank you for being patient. You can probably tell I’m sort of proud of her but the reality is when I’m home she tells me ‘Take out the garbage, walk the dog, I don’t care what you’re doing in Detroit.’
“But I want to thank all of you also because from the judge to the mediators to the professionals to a little part I’m playing, as Al mentioned, this is an effort, a restructuring effort that shows what everybody in this room does, the unique capacity in America to take an enterprise, be it civil, municipal or private, restructure it and give it a fresh start, to give it the opportunity to thrive, to give it the opportunity to grow, and many people out there in the community don’t quite understand what we do. Many of them look at bankruptcy as a bad sobriquet as opposed to a business tool that has grown and achieved normalcy in how we use it. So whether it’s doing something in Detroit or doing something in a private enterprise that you all do, I’m just proud to be a small part of your brethren and be given this opportunity to allow this city to rise from the ashes.
“Thank you and I’d be happy to take any questions.
Q1 (paraphrased): What will happen with the art collection?
KO: Good question. Last year when I came in, I kept saying …we actually hired Christie’s to come in and do an appraisal and they’re one of the most pre-eminent as you all know, Christie’s, Sotheby’s are one of the most pre-eminent organizations around. We hired them in April and there were two weeks of “Kevyn Orr is casing the joint, he’s going to sell it all off, he’s going to be a Viking in this thing.” So I asked Christie’s to go away. I’ll say right here, thank you to Christie’s because they took a little hit for that. They lost some commissions in that process, and people were calling them a carpet bagger. But I did that for a reason. We spent the following seven month saying to the community and the DIA, “This is an opportunity for you to save yourself. If you don’t we may have to go out and sell some art because we’re in a bankruptcy and you sell assets, rationalize prices, that’s what we do.” Fortunately people listened to that and as a result the foundation community came in and one of their conditions of all the funders for that $816, the $366 million from the foundation, the $350 million from the state and $100 million from DIA is that none of the art be sold. So on our plan, we’re going to preserve the art in place, and it’s one of the most stellar art museums in the nation. We have four Diego Riveras in the mural, we have wonderful paintings but the interesting thing about the Christie’s assessment is everybody thought we had 66,000 pieces of art and they were going to be worth $50 billion. In fact they weren’t. It’s $367 million to about $860 million or some odd and really only 400 pieces of that 66,000 pieces really have the value. So we fortunately will have the opportunity to preserve the art institute. It’s a great facility not just for the city but for America. That was an opportunity we did not have seven months ago.
Q2: audio missing
KO: I think your question is am I monetizing assets in the city? Is that your question? Some and some not. Under Chapter 9 it’s a little bit different, 903 and 904, I can use bankruptcy speak in this crowd, in the code, 903 and 904 give the city substantial discretion as to how it manages its affairs and handles its assets. In fact the judge, Judge Rhodes, very presciently I might add, added an order that said the city has discretion to make many of those decisions. So we’ve looked at opportunities. Really in the city there were three principle issues we had to deal with. One was DIA, which is now off the table because we have the foundation funds, The other is the Detroit Water and Sewer Department, which we’re going through an analysis now as to whether or not a contractor provision or even a mediation process will go through to see if we can create an authority to provide some benefit to the city. The really only other one city-owned buildings, city-owned land, there was Belle Island, but that island which was designed by James Olmstead, the fountain, it was designed by the same architect that did the Supreme Court, that island we’ve leased to the state so we that can preserve it as a haven for city residents. There are a few miscellaneous pieces but that’s generally what we’ve done so far to try to maximize value for our creditors.
Q3 (paraphrased): (Person asking is from Chicago) What tactical lessons do you think you’ve learned that can apply to other cities and states around the country tackling some of the same issues?
KO: Thank you for that question because I try to say every time I go out, you know, all municipalities are different, cities, states. All have different enabling legislation as far as what they can do. All have different tax bases as far as what they can do. Chicago has a quite healthy tax base. It’s one of my favorite cities. I used to like to go to Hamburger Hamlet quite a bit before it shut down. But it’s a different city but you do have $19 billion in pension obligation, another $1 billion due this year. Generally speaking at 40,000 feet, and I think your mayor is well aware of this as well as mayors of other cities, you know delay does nothing for you, does nothing for you. The reality is, one of the ways we’re able to get the pension to 100 percent for our police and fire, our uniformed retirees, and roughly 95 percent for our general service retirees is that their market investments in the pension funds behaved better this year. Well part of their behavior being better, is there’s some oversight. You know everybody’s looking
I have a statute saying I’ll make criminal referrals if there’s any inappropriate behavior. Some of those funds have had four trustees and general counsel in prison, doing time at Club Fed as we speak because of misbehavior. So if people behave in a rational way and deal with the issues early on, you get over the risks that belaboring, it doesn’t get better. This issue with Detroit has been coming this way for 60 years since 1950 when population began to go down and for 25 years more acutely when it was clear that the tax base of the city could not support the services and in the past 10 years from 2000 to 2010 when a city of a million lost 240,000 residents, 24 percent of its population in 10 years. That’s a city that’s lost a city the size of Taylor or Wyandotte every year in the city. Clearly there were plenty of warnings. It’s just the chance that you have to take the opportunity to deal with them.
Q4 (paraphrased): What do you do next? What can you do that would match this kind of assignment and is a political career something that you would consider?
KO? My boss lady is in the room so the answer to the second question is no, and the first answer is a “warm island with my wife and kids.” I don’t know, you know, I really I can’t say I’ve enjoyed the process because there are so many different dimension to it that I didn’t imagine. As one of my staffers, I’ve said “yeah, I’m not a politician” in one of my whiny moments, he said “Yeah you are, you’re just not elected so you need to get over that.” I’ve since learned to put that cloak on. I’m looking very much forward to taking it off, and there are no political aspirations inside of this heart. I’ve had enough.
Q5 (paraphrased): Have you seen signs that the city has stabilized in population?
KO: That’s a very good question. In reality is we’re probably at 685,000 but there’s some shallowing in population loss, and actually in the CBD, Central Business District, there’s some growth. We don’t have enough housing for people coming in. But the other thing that makes it very good, consider this: in the next two to three years, Detroit is going to have five major infrastructure projects in that city for tens of thousands of jobs. We’ve got a new bridge. We’re such an important trade route for Canada, they’re going to build us a multi-billion dollar bridge. We have a welcoming center that goes along with that. We’ve got, downtown, we have a new arena coming in. We’ve got M-1 Light Rail going up the Woodward Corridor that’s going to be partially federally funded and locally funded and we have indigenous development that’s all along the Jefferson Corridor. So not only are jobs coming back, not the auto industry jobs necessarily but new jobs and an opportunity not just for jobs, residents but for taking many of our young people – I had a meeting with United Way of Southeast Michigan yesterday and I couldn’t tell you how many groups are dedicated to training our young people so they can get into apprenticeship jobs, become skilled tradesmen on a way to a better life. We’ve got a lot of work, I don’t want to be Pollyannish, 139 square miles and the population loss we suffered over 10 years is significant…but the opportunities that are coming he way of the city in order to turn that around are at least much better than if they weren’t there which would be a different story. There’ a reason to hope that’s based in reality is how I put it.
Audience Member: “I hope all your hopes come true and keep up the good work.”
The largest municipal bankruptcy in history isn’t all about the financial claims of global banks and the thousands of pensioners who are justifiably making headlines in recent days.
A handful of individuals whose lives sometimes were severely disrupted or perhaps ruined by city-related activities are now considered “unsecured creditors” by terms of Detroit’s Chapter 9 filing. These people were litigating their civil rights cases against the city when the bankruptcy filing halted those procedures.
Their claims may not be on billion-dollar deals, but they are part of the bankruptcy conversation. Their stories illustrate the complexities of Detroit’s insolvency case. They serve as a bold reminder of the potential that municipalities, their employees and their actions have to dramatically affect lives, for better or for worse, in everyday operations.
One example in this “creditor class” is Walter Swift, who through his attorneys filed an objection on Tuesday to the city’s Disclosure Statement, the document outlining how the city will restructure its debt as it eventually exits from Chapter 9.
Full disclosure: I met Walter in a previous life when I wrote for Metro Times, Detroit’s alternative newspaper. (I even talked about him with Craig Fahle on WDET.) Swift, an admitted drug user and less than model citizen, was convicted of sexual assault in 1982. Twenty-six years later, the national Innocence Project helped clear him, and he was released from prison.
Since then, he’s struggled. I’ve followed his saga, admittedly from the sidelines, but I’ve known he’s been in and out of rehab and jail. Funds raised after his release are spent. He sometimes struggles to stay alive.
Because of a lab technician’s error and withheld evidence, according to his lawsuit and case file, years of his life were stolen, including his inability to right his own course. While some wrongly convicted people say prison gives them a new start and they emerge to healthy, productive lives when freed, Walter didn’t have that experience. He came out with little promise for his own future. He did, however, have the strength of his claim against a city whose law enforcement department’s errors arguably committed its own crime in his investigation and prosecution.
Swift sued the city in 2012 in U.S. District Court. That lawsuit is now lumped in with all “unsecured creditors,” and Swift’s litigation is on hold pending bankruptcy court action.
The man with the drug problem, arrest records and questionable personal future isn’t exactly the most sympathetic of “creditors,” but the city’s role in creating that life for him isn’t being explored.
So while bond insurer attorneys from around the country clog the court docket with massive subpoenas for centuries of records, the intricacies of the future governance of pensions boards and museums are sketched, and individual ballots for thousands of pensioners are printed and mailed reflecting their city payments, Swift’s relatively simple claim languishes.
One interpretation of a bankruptcy filing is that it allows leadership and the courts to remedy financial sins of the past. How will civil rights be credited?
-By WDET’s Sandra Svoboda
@WDETSandra and email@example.com
Detroit Journalism Cooperative partner WDET is examining the concerns of Detroiters over the next few months in a series we call the Detroit Agenda. It’s a series that brings forward the voices of the residents as they experience daily life in the city that’s currently going through the largest municipal bankruptcy in history.
While lawyers, the emergency manager and the city’s elected leaders work out the long-term deficit elimination plan and the financial restructuring, one of the biggest concerns facing city residents is crime. But beyond the statistics and the headlines, there’s the aftermath of crime. As WDET’s J. Carlisle Larsen reports many Detroiters look to the religious community for solace.
“The oldest theological question is: Why do bad things happen to good people? It’s the question in the oldest book of the Bible, it is the theme that runs through all of scripture and for the most part through all of our life,”
That’s from Kevin Turman who has been the Senior Pastor of Second Baptist Church in downtown Detroit for more than 25 years. During his tenure at the church, many of his members have been the victims of crime. He says in some cases criminals have waited for congregants to go to church before robbing their homes. Turman says his church has also seen brutal violent crime. One incident he describes involved the murder of a teenage girl.
“When she went to the friend’s house the two of them went to another home. And in the midst of their being at that home, apparently elsewhere in the home drugs were being both bought and sold and someone thinking money was inside came in robbed the home. Shots were fired the girl ran and she was subsequently—as she was running—shot and killed. Well the people who were in her Sunday school class, the people who were in the choir with her, the people who saw her around the church…felt that this was as tragic a circumstance as had been visited upon them.”
Turman says he mourned the loss of the girl along with the congregation in order to begin the community’s healing process. He says one of the church’s roles is to help parishioners to avoid becoming cynical when crime happens.
“It’s very easy to become suspicious of others, hateful, and it is the role of the minister and the role of ministry to help people understand that there has always been evil in the world and that doesn’t make the world a bad place. It makes it a place where the struggle to be good and loving and kind is indeed a struggle. But it’s a struggle we need to continue to engage in.”
On the far west side of Detroit another church has had to tackle the issue of violent crime. Spencer Ellis is the Senior Pastor and Founder of Citadel of Praise in the Brightmoor neighborhood. He says his church had a member who was a single mother of two. She was raped and murdered. Ellis says providing counseling to church members in the aftermath of violent crime is difficult. He says members may not feel emotional relief for a long time.
“I wish I could give the ‘Take two pills and call me in the morning’ type, or I wish I could just give you the steps—‘Here’s the steps, and tomorrow is going to be okay’—and when you can’t provide that—I mean because the counseling we provide here is spiritual and we have to depend on a God that we don’t see but that we believe in to help us get through it. And it’s a faith walk.”
But spiritual guidance isn’t the only comfort that churches can provide. Terri Laws, religion professor at University of Detroit-Mercy, says in times of crises, churches historically have stepped in to provide material help to mourning families.
“There are families in those communities who were not anticipating a young man—or a young woman—to be murdered, for example. And that they don’t have the funds to have—they literally do not have the funds—to hold a service at a funeral home. Someone then—a pastor in a community then—chooses to open their doors, use their light, their heat, their church choir, in order to provide a home going service for that young person.”
Ellis echoes this sentiment. When the single mother from his church was killed, Citadel of Praise paid for the funeral. Laws says funerals and sermons can provide a collective catharsis for parishioners.
“So, in that immediate moment when compassion is certainly needed for the family there are always other people in the congregation who are very aware that it could be their son, or it could be their daughter and they’re identifying with the horror of losing a child, or with the horror of losing a child particularly to violence.”
Turman says at Second Baptist Church he works to find the balance between the tragedy and hope. He says when he preaches, he chooses to focus on the positive, even when it is difficult.
“I don’t preach about violence. I don’t preach about death. I don’t preach about hate. I preach about love. I preach about peace. I preach about hope. And I acknowledge though that it’s hard to find hope in some of these situations.”
Turman says he doesn’t have all of the answers to why bad things happen to good people. But he says faith helps.
–J. Carlisle Larsen, WDET, a member of the Detroit Journalism Cooperative
NextChapterDetroit’s Sandra Svoboda appeared with Michigan Public Radio Network’s Rick Pluta and State Rep. Rashida Tlaib (D-Detroit) on The Craig Fahle Show to discuss this issue.
Michigan’s term limits are widely vilified for causing damaging turnover, a loss of institutional knowledge, increased power for lobbyists and decreased cooperation among lawmakers in Lansing. But when Next Chapter Detroit started asking about how term limits have, are and will affect Detroit’s bankruptcy, their effects became debatable and complex. Political observers and elected officials interviewed had answers starting with “not much” and “that’s an interesting question.” Some said “they make it difficult to navigate” the complex legislative policy environment. Others blamed term limits for a lack of adequate or proper state support for Michigan’s largest city.“I really think we’ve lost (millions of dollars) because of term limits,” says Rep. Rashida Tlaib, (D-Detroit.)
Enacted two decades ago, Michigan’s term limits apply to the state legislature and statewide executive offices. Representatives are allowed three, two-year terms, while senators, the governor, the attorney general and secretary of state may serve two four-year terms. In the 15 years since term limits starting having an effect, Detroit has had its steepest decline. That financial collapse is linked to a variety of economic and social factors.
But there are also crucial political components in the Legislature related to the city’s run up to, filing of and eventual emergence from bankruptcy that may have gone differently without term limit dynamics also involved. For example, some of Detroit’s leaders and advocates can’t forgive the state for a revenue-sharing agreement that by some calculations has cost the city hundreds of millions of dollars. The 1998 pact, described as a “handshake deal” between then Gov. John Engler and Detroit Mayor Dennis Archer, dictated that the city would cut is income tax rates in exchange for $333.9 million annually for nine years in revenue-sharing funds.
“Many of today’s lawmakers are ignorant of those particular agreements, making them even more susceptible to the carefully scripted narrative that all of the city of Detroit’s financial challenges are self made instead of taking the time to look at some of the history,” says Ken Cole, the city’s lobbyist. “(The) broken agreements ended up costing the city hundreds of millions of dollars and contributed greatly to the financial collapse.”
Then there was the emergency manager legislation itself. While several cities and school districts have had such administrators installed by both Gov. Jennifer Granholm and Gov. Rick Snyder, the current legislation barreled through a lame duck legislature after voters rejected the previous law in late 2012. The Detroit caucus in Lansing was powerless to stop it, and Kevyn Orr arrived in the Motor City a few months later.
The Chapter 9 bankruptcy filing happened mid 2013. The next legislative battle could be over Snyder’s budget proposal to provide $17.5 million a year for 20 years to Detroit, a proposal he has been lobbying for since he proposed it to the legislature’s Joint Appropriations Committee Feb. 5.
Bruce Timmons, former legal counsel for the Michigan House Republicans, says even with his own party in power, the governor has a tough challenge. “Sadly I think there is still an anti-Detroit bias, there has been for a very long time, among Republicans,” says Timmons, who retired last year after more than four decades as a legislative staffer. He posits the limits imposed on legislators curtail the time they can spending learning, understanding and perhaps sympathizing on complicated issues.
“If you’re there long enough, you get a chance to really broaden your understanding. You get to know what’s going on,” he says. With relatively weak representation, as compared to past eras, the Detroit caucus arguably does not have the power to shift political will in the Senate and House to approve such funding.
Outstate legislators fear backlash in their home districts, assuming voters’ short memories wouldn’t allow “forgiveness” at the polls for a pro-Detroit stance on funding matters. “They don’t know they can make a tough vote and survive,” says Bill Nowling, Orr’s spokesman, who worked as a legislative staffer in Lansing in the 1990s.
But Bill Ballenger, editor and publisher of Inside Michigan Politics, cautions against assigning too much blame to term limits for how Detroit is perceived and treated in the state capitol. “The Michigan Republicans completely run the show from out state, and despite the fact they may give lip service to what’s going on in Detroit might be helped, I’ve got to tell you, there isn’t much sympathy for Detroit in the legislature today,” he says.
While Democrats have seen their influence slide with Republican majorities in both chambers, Detroit has seen its representation there cut in half as the city’s population loss is reflected in its number of legislative positions. In the 1960s, Detroit’s representation peaked with 24 representatives and 9 senators with districts drawn entirely or primarily in the city.
Today, says Zachary Gorchow, editor at Gongwer News Service, there are just 10 house and five senate districts with exclusive or significant Detroit geography. “The biggest factor that’s hurt Detroit has been you’ve got so much less representation now than you had 30 or 40 years ago,” Ballenger says.
Numbers withstanding, term limits researcher Marjorie Sarbaugh-Thompson says the post-limits environment has changed how individuals interact and relate to each other, which affects how deals are done. “There used to be friendship networks that were quote elaborate groups of friends who would be across party lines. They had opportunities where they could sit down and get a deal done,” says Sarbaugh-Thompson, a political science professor at Wayne State University. “None of these clusters of friends are bi-partisan now. Those bi-partisan clusters have vanished. They’re gone.”
With the Detroit caucus entirely Democratic and both chambers with Republican majorities, Sarbaugh-Thompson finds little cooperation happening on highly charged, partisan or complicated issues. And Detroit-related legislation is nothing if not that, term limits or not.
-By WDET’s Sandra Svoboda @WDETSandra and firstname.lastname@example.org
– Feature Image Source: Phillip Hofmeister