The authority that will oversee the disbursement of $195 million of state money to Detroit’s pension funds if the bankruptcy restructuring plan is approved is holding its first meeting at 9 a.m. Friday.
We’ll have updates from the meeting. Meanwhile, here’s some background:
The Michigan Settlement Administration Authority was created as part of the “Grand Bargain” legislation, specifically House Bill 5575. Rep. Fred Durhal Jr. (D-Detroit) was its sponsor. It exists to pay the $195 million to the city’s retirement systems when (if) Judge Steven Rhodes approves the city’s Plan of Adjustment to exit bankruptcy. The authority, according to the statute that created it, dissolves on May 2.
Members of the Authority are State Treasurer Kevin Clinton, State Budget Director John Roberts and I. William Cohen, who was a senior partner at Pepper Hamilton, one of the law firms advising Detroit in the bankruptcy case, before he retired in 2009. Gov. Rick Snyder named Cohen to the Authority last month.
We’re back in open session after the roughly 40-minute closed session. Members said they were discussing a “written memorandum of legal advice.”
The authority adopted a motion to limit public comment to 5 minutes at future meetings.
And we’re adjourned.
These are the reasons a public body, such as the new Authority, may go into a closed session (as printed in the handbook) with comments on the likelihood today’s session relates to each reason.
(1) To consider the dismissal, suspension, or disciplining of, or to hear complaints or charges brought against, or to consider a periodic personnel evaluation of, a public officer, employee, staff member, or individual agent, if the named person requests a
Note: As this is the first ever meeting of this Authority, this seems nearly impossible as the reason for this closed session.
(2) For strategy and negotiation sessions connected with the negotiation of a collective bargaining agreement if either negotiating party requests a closed hearing.
Note: The statute creating the authority does not explicitly give it the power to negotiate contracts. Also, the city has reached collective bargaining agreements with its unions as part of the bankruptcy process. The latest was with police and fire unions. Earlier this year, a coalition representing about 3,500 other city workers agreed to terms.
(3) To consider the purchase or lease of real property up to the time an option to purchase or lease that real property is obtained.
Note: This in no way relates to the authority’s mission.
(4) To consult with its attorney regarding trial or settlement strategy in connection with specific pending litigation, but only if an open meeting would have a detrimental financial effect on the litigating or settlement position of the public body.
Note: Ah, OK. As we’ve noted below, Steven Howell is in the closed session. He’s an attorney with the Dickinson Wright firm, but he’s been part of the bankruptcy trial, representing the state of Michigan. As the city’s trial — technically a confirmation hearing on the Plan of Adjustment — is ongoing, perhaps this is the reason. Although with the vast majority of creditors no longer objecting to the plan, it’s unclear how much state strategy is needed. On another note, pending litigation remains challenging the state’s emergency manager law, although some of it goes away per the terms of the Grand Bargain.
(5) To review and consider the contents of an application for employment or appointment to a public office if the candidate requests that the application remain confidential. However, all interviews by a public body for employment or appointment to a public office shall be held in an open meeting pursuant to this act.
Note: The authority has no employees.
(6) To consider material exempt from discussion or disclosure by state or federal statute. But note – a board is not permitted to go into closed session to discuss an attorney’s oral opinion, as opposed to a written legal memorandum.
One of the people still in the room is Steven Howell. He’s an attorney with the firm Dickinson Wright, representing the state of Michigan. He’s been involved in Detroit’s bankruptcy case, appearing during the ongoing trial.
It took the new Authority about two minutes to go into a closed session (that means members of the public, including media) were kicked out. Staff from the state Attorney General’s office stayed in the room. The only thing the panel did before they “closed the door” was to appoint a secretary and discuss the process for posting meetings.
At 22:10 of the town hall face off last night, moderator Stephen Henderson, Detroit Free Press Editorial Page Editor, asked the candidates about Detroit’s bankruptcy and the emergency manager. Here is a transcription of the questions, the answers and the follow up from Republican candidate Gov. Rick Snyder and the Democratic challenger Mark Schauer.
Freep columnist Nancy Kaffer weighed in on the topic in this piece today, and moderator Christy McDonald, from our Detroit Journalism Cooperative partner Detroit Public Television, reviewed the town hall today on WDET’s Detroit Today.
STEPHEN HENDERSON: Detroit, the city of Detroit, has an emergency manager and is trying to get through a complicated bankruptcy. Is this the right policy, the right approach to the relationship between cities and states? Is there more the state needs to do to prevent cities from falling into those financial problems? And what do they need to do to help them out on the back end?
GOV. RICK SNYDER: That was a big question, Stephen. Let me start the other way with actually what we’re doing now is we’re working on an early warning system to help communities because I never want to appoint an emergency manager, and it’s not a subjective process folks. It’s an objective process. I don’t simply decide that. Certain conditions in terms of a financial emergency have to exist first.
With respect to Detroit I went through that in a very systematic way. Tring to work with the prior administration in Detroit to say “Let’s just work together.” That didn’t work. We did a consent agreement to say the city needed to do certain thing to get the city out of trouble. Those things weren’t done. So then it came to an emergency manager. So I appointed an emergency manager. And then it came to the question of actually putting Detroit in bankruptcy. That was one of the toughest decisions to be made in the United States. It was the right decision to make.
Look at where we are today. We’re within a month to two months most likely of coming out of bankruptcy. We would have shed $9 billion of liabilities. If we hadn’t done this, the operating budget for the city of Detroit, more than 60 percent would go to paying past debts. There would be no money for services. In the meantime while this has been going on, what’s been happening? Streetlights have been going up. Trash is being picked up. Public safety is improving. Violent crime is down in double digit percentages in the city of Detroit. All these good things are going on and now we’ve transitioned back out because my goal is to have the emergency manger come in, do their job, get out, be done and get it back to the community with good oversight though so it doesn’t fall backwards. Stop and think: Have you ever thought you’d see Detroit as well poised for a bright future as you see today?
HENDERSON: Congressman. You have opposed the emergency manager legislation, how would you handle all of this differently?
SCHAUER: Well, first I believe in democracy. The people voted in 2012 to overturn that law. As governor, placing myself becoming governor in 2011, I would have abided by the will of the voters. What I would have done is personally led. As governor, I will be in Detroit. I will work out of the office on Cadillac Place and be a full partner with Mayor Duggan for the comeback of Detroit. Mayor Duggan is supporting me because he knows that I will be a strong and active partner. We need good jobs in our communities, but what I will do as governor, in addition to personally lead, is put together financial transition teams where we can be proactive. What our current governor has done, two things, is engaging in a strategy of fighting fires, fighting crises. Of course a $69 million revenue-sharing cut for police and fire in the city of Detroit didn’t help. But after cities get into financial crisis and school districts get into financial crisis, they assign emergency managers.
The second thing, quickly, is I never would have cut retiree pensions. Our constitution is clear: pensions are guaranteed. Again, on top of the pension tax, cutting pensions through the emergency manager, as governor himself, is wrong. It’s hurting people. It’s no way to build a strong economy.
HENDERSON: Governor, I want to give you a chance to respond to the question about democracy. You’re suspending local democracy when you send in an emergency manager. People in the state voted not to have emergency managers. How do you address that?
SNYDER: No, what they said is, we’ve had EM going back to Gov. Blanchard in 1988. There have been a lot of EM before I stated this process. In fact, I inherited a number of them. What we did was enhance their skill set so they could do their job and get out. There was a ballot proposal that said certain aspects of it people didn’t like. We listened to that. We didn’t do those things. We put something back in place so we could move forward.
Think about this: traditionally emergency managers were there way to long. So Detroit, other than the bankruptcy, the city is now running the city of Detroit. We have an emergency manager that now has left in Pontiac, Benton Harbor, Allen Park, Ecorse. It’s working, folks. We’re getting thee cities back on their feet that didn’t have an opportunity to before. Because we know how big the messes were.
I’ve asked the Congressman. If you’re not going to do things like looking at bankruptcy, a very last resort. And again, it is constitutional. A federal judge said that. I’ve asked the question is, what are you going to do to pay those $9 billion in liabilities? How are you going to have a budget where you have 60 percent going to liability costs?
HENDERSON: Very quickly, Congressman.
SCHAUER: We’ll go back to a hypothetical if I had been governor without an emergency manager, that would not have changed the books for the city of Detroit. I’m not questioning whether the city of Detroit needed to go bankrupt but I would have personally led rather than having an unelected, unaccountable person do it and I would never have thrown Detroit city pensioners, police officers, firefighters under the bus. That hurts them.
SNYDER: We didn’t leave them under the bus. We did the grand bargain, and I want to thank the bipartisan support of the Legislature to work with the foundation community. Retirees did take cuts but we minimized them. I appreciate them. They ended up supporting the agreement and I respect them for their great role in this settlement.
Remember Andy Dillon? He was the state representative from Redford who became Speaker of the House. After he was term-limited out, Gov. Rick Snyder named him state Treasurer where he played a key role in Detroit’s run up to bankruptcy. Now he’s with Conway MacKenzie, a restructuring firm that has been paid more than $8 million by Detroit for its work related to the bankruptcy case.
Today The Detroit News reports Dillon may help manage city retirees’ health care benefits following the bankruptcy.
The Retired Detroit Police & Fire Fighters Association wants to appoint Dillon to the board of a new trust that will manage health care benefits for retired public safety workers after the city sheds billions of dollars in legacy costs in bankruptcy court. The latest version of Detroit’s restructuring plan names Dillon and retirees Gregory Trozak and Allan Grant as the retiree association’s appointees on the seven-member board of the new police and fire Voluntary Employee Benefits Association, or VEBA.
The plan calls for two trusts — one for general retires, another for police and fire — to share $450 million from the city to fund the medical care. The city estimates that retiree health care will cost $4.3 billion.
“It will be a challenge to maintain the coverage that retires have today, so some tough decisions will have to be made,” Dillon told The Detroit News.
The city filed an updated Plan of Adjustment this week, and it reflects the myriad happenings since the previous version was entered into the court record in early May:
The Michigan Legislature passed and Gov. Rick Snyder signed a package of bills providing $195 million for pension funding as well as oversight of the city’s finances. Part of the so-called “Grand Bargain,” the arrangement also protects the collection of the Detroit Institute of Arts from sale and creates a new, separate entity to operate the museum.
Creditors, including 32,000 pensioners had a chance to vote on the plan. About half the pensioners eligible returned their ballots, overwhelmingly approving cuts to their pension payments, cost-of-living increases and health care benefits and waiving current and future suits involving the Michigan Constitution’s provision protecting pensions and PA 436, the emergency manager law.
The city has reached agreements with several creditors, and how those affect ongoing city operations are outlined, to some extent.
Below is the “red-lined” version of the latest Plan of Adjustment, showing changes from the previous version. Judge Steven Rhodes will consider the plan at the confirmation hearing, now scheduled to begin Aug. 21.
Gov. Rick Snyder is praising Detroit pensioners for approving the city’s bankruptcy restructuring plan, saying “it was hard.” But Snyder admits the bankruptcy is far from a done deal. Other creditor groups are still opposed to the plan and are likely to fight it in court next month. That’s when the trial phase of the bankruptcy begins.
At exactly 4:06:22 p.m. today, Detroit’s bankruptcy hits the one-year mark. Detroit News business columnist Daniel Howes said it well:
“There will be no celebrations at 4:06 p.m. Friday, only quiet acknowledgment that the largest municipal bankruptcy in American history is marking its first year.”
The Detroit Free Press marked the anniversary with a package of stories last weekend that explored the year in court, the effect in the communities and the new political structure at city hall. Later this week, the Freep published a report predicting a population decline that will make the future even more challenging.
The costs of this municipal bankruptcy itself are high, to be sure, the highest in history. As of June, the city had been billed $75 million by 19 law firms and financial consultants involved in the case, Crain’s Detroit Business reported.
While not everyone likes the negotiated terms that are emerging in the settlement, there is no doubt Detroit’s bankruptcy is moving toward resolution faster than anyone could have expected a year ago. It still faces a confirmation hearing, scheduled to begin Aug. 14, and Judge Steven Rhodes will undoubtedly see in the mirror the proverbial King Solomon as he tries to find the fairness and reasonableness to creditors, including city retirees, in the plan. He also knows he’ll be setting legal precedent as he crafts the settlements and restructuring plans, which will be used in future municipal bankruptcy cases across the country.
We can describe with relative certainty a few elements of the next stage of this case: The pensioners will take cuts to their monthly checks and pay hundreds of dollars more out of pocket for health care. International media will print, broadcast and post more photos of blight juxtaposed against the RenCen as they try to chronicle the decline and possible resurgence thanks to bankruptcy of this city. Courts will decide the legality of the state’s emergency manager law, the remaining pre-trial issues in the Chapter 9 case and future appeals. Lawyers will make more money. Mayor Mike Duggan and the city council will eventually assume control of the city’s departments with “clean” balance sheets and a responsibility to all the city’s neighborhoods, residents, business owners, investors and oversight committees created by the state in the terms of the $195 million pension contributions.
Whether we see real improvements in access to jobs, quality education for children and adequate public safety for everyone remains to be seen. Lansing, quick to congratulate itself for the package of bills providing money and oversight, could do more and should be pressured to do so. What could possibly be on that agenda? How about statewide reform to municipal finance and a re-examination of revenue sharing, regional transit to help Detroiters get to jobs in the suburbs and help with collecting income tax from Detroiters who work outside of the city. Those three elements would be a start but the governor and the Legislature have been silent on those issues.
Many of us will continue to frame the city’s bankruptcy with the competing if extreme truths that “there will be a course change to reroute Detroit’s economic decline, failure of public institutions and creating protections against corruption” and “the bankruptcy is undermining unions, codifying the legality of slashing public benefits and creating huge billing tallies for silk-stocking law firms.” Hopefully how we define the bankruptcy’s causes will not limit our ability to emerge from it and restore city services, improve life for residents, ensure fiscal stability and make countless other improvements.
As for the Emergency Manager’s future plans when his term expires later this year? He told WWJ radio’s City Beat Reporter Vickie Thomas that he’ll “leave quietly,” saying he was surprised by the level of public scrutiny the case brought to him and the city.
“I think it’s appropriate for me, when this does come to an end, to exit quietly — I’m off the stage — and let the regular order return and let the city’s sort of healing process take; and let the patient recover on their own,” Orr told Thomas.
Three years ago, only a half-dozen cities and school districts in Michigan were being run by state-appointed emergency managers. Today, 17 are in some phase of receivership. Detroit Emergency Manager Kevyn Orr filed for bankruptcy, history’s largest for a municipality. Bridge magazine writer Chastity Pratt Dawsey examines the effectiveness of the emergency manager law and how it measures up to similar laws in other states in a report for the magazine’s latest issue. She joined Michigan Radio’s Stateside program.
At the beginning of the year, newly elected Mayor Mike Duggan said to watch what happens in six months. The media partners of the Detroit Journalism Cooperative did just that, examining how the city is functioning while in bankruptcy and how the leadership of Mayor Duggan is impacting services and neighborhoods.
Next Chapter Detroit posted the DJC’s coverage of the mayor’s first six months in office as it was released…and now brings this compilation of all the partners’ work:
We start with a look at the mayor himself. Here’s a profile by Michigan Radio’s Lester Graham. Also Bridge Magazine’s Mike Wilkinson looked at Mayor Duggan’s penchant for creating his own performance measures, both how they’re defined and reported.
Benchmarks from Bridge
After this introductory piece, Bridge magazine published a series of stories looking at how well Mayor Duggan is meeting certain benchmarks, some of which he set for himself, at the beginning of his term. They are:
City Services, written by Michigan Radio’s Lester Graham Jobs, written by Rich Haglund Livability, written by Nancy Derringer Public Safety, written by Michigan Radio’s Sarah Hulett Public Transportation, video by Hailey Zureich and John Zyski Schools, written by Michigan Radio’s Sarah Cwiek
The Craig Fahle Show
Craig hosted guests for several segments to talk about aspect of the mayor’s work and the Detroit Journalism Cooperative coverage. He was joined by Bridge Magazine’s Nancy Derringer, Michigan Radio’s Lester Graham and WDET/Next Chapter Detroit’s Sandra Svoboda to discuss what the mayor has — and hasn’t — done.
Craig also spoke with listeners on June 23 to hear their assessments of Duggan’s performance. Generally they think he’s doing a good job — but say the city needs more.
In Mayor Mike Duggan’s first six months in office, one of the biggest difference between him and previous mayors has been his relationship with the City Council: Council member Saunteel Jenkins tells Craig it’s a cordial one that works. “It’s different because the mayor has actively pursued a relationship with council,” she says.
Detroit Public Television
On the television airwaves, DPTV aired two programs with discussions about Mayor Duggan’s first half year. First, the MiWeek team evaluated some of the mayor’s biggest successes and remaining challenges. Then American Black Journal dug into the Blight Removal Task Force, one of Mayor Duggan’s signature efforts.
Every Detroit mayor for decades has talked about blight. One of the biggest problems facing Detroit is the huge number of abandoned houses, buildings, and vacant lots. Here’s a look at what’s changed in how that issue is addressed since Mayor Mike Duggan took office, by Michigan Radio’s Lester Graham.
Graham also reported that one out of every three Detroit households doesn’t have a car. They rely on the bus system. But it’s broken. People at the Rosa Parks Transit Center in downtown Detroit disagree whether it’s gotten any better since Mayor Mike Duggan took over the Detroit Department of Transportation, but officials at the department say they’re working to get more buses on the roads.
Michigan Radio’s Stateside program on June 23 featured Detroit Reporter Sarah Cwiek and Investigative Reporter Lester Graham who talked about Mayor Duggan.“He’s showing some real leadership skills for a guy who has been elected to serve a city with no power,” Graham says on the program. Stateside also hosted a conversation about transportation in the city.
Until recently, almost half the streetlights of Detroit were dark. Thousands of new streetlights are replacing the old broken ones. Michigan Radio’s Lester Graham caught up with one of several crews installing streetlights in neighborhoods around Detroit and discovered fewer, less expensive lights to power and maintain means a big drop in cost.
When elected, Mayor Duggan took over a city run by someone else: state-appointed Emergency Manager Kevyn Orr. Still, Michigan Radio reports that doesn’t mean Duggan has been denied all the rites of passage of the job including the schlep to Lansing to ask the state Legislature for something. Every mayor has to do it. And Duggan had to go to Lansing with a really big ‘ask.’ We’re talking about the $195 million dollar rescue package for his city (that’s right, ‘rescue,’ ‘settlement.’ Just don’t call it a ‘bailout.’)
WDET’s Quinn Klinefelter found some Detroit residents say the initiatives undertaken by the Mayor are producing mixed results as he works to create what he calls a “livable” city – one that attracts new residents and maintains a stable tax base. WDET’s Pat Batcheller looks at efforts to improve the city’s bus system and transportation department.
Mayor Mike Duggan acknowledged one of the single biggest hurdles city residents face when it comes to transportation during his State of the City address in January: the high cost of auto insurance. WDET’s J. Carlisle Larsen takes a look at what the situation is for drivers in the city.
To get a sense of how a candidate plans for success and how they go about implementing such a strategy when elected, WDET’s Travis Wright spoke with former Mayor Dennis Archer. Twenty years ago this week, Archer, a former Michigan Supreme Court Justice was wrapping up his first six months as mayor. When Archer looked back on those crucial first months in 1994, he said it all started when he tapped six University of Michigan professors to help him craft a city improvement plan in 1990.
-By WDET’s Sandra Svoboda
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