The special House Committee on Detroit’s Recovery and Michigan’s Future is holding its fourth hearing today on the 11-bill package to provide funding and oversight for Detroit post-bankruptcy.
On today’s agenda: Detroit Mayor Mike Duggan, City Council President Brenda Jones, State Rep. David Nathan (D-Detroit) and Richard Ravitch, former lieutenant governor of New York and the bankruptcy court’s special expert witness in the Detroit case.
Watch it live here:
The Michigan Building and Construction Trades Council will contribute money toward the “grand bargain,” federal court mediators announced late Monday. The Council, a statewide coalition of dozens of trade unions, becomes the first labor group to commit cash toward funding Detroit’s pensioners as House Speaker Jase Bolger (R-Marshall) called for last month.
The Council, organized into nine districts covering Michigan, is a coalition of building and construction trade unions. The Greater Detroit Region lists more than two dozen member unions ranging from Asbestos Abatement Workers to Teamsters.
The mediators’ statement did not include a dollar figure but said the Council would make “material contributions toward health care costs for Detroit’s Retirees.” When the city filed for bankruptcy last year, its obligations for post-employment health care and other benefits were estimated at $5.7 billion to $6.4 billion. The city’s current Plan of Adjustment and agreements with some employee and retiree groups includes moving health care administration to Voluntary Employee Benefit Associations.
The mediators said “it is hoped that other labor organizations will soon come to the table ad support this effort to assist Detroit’s retirees in meeting their health care costs.”
Bolger, who released a statement shortly after the mediators, also did not offer any details of the Council’s contribution or other terms of the support. “Detroit’s recovery will require all hands on deck, and I am grateful to see these union organizations stepping forward to take a seat at the table,” he said. “This leadership is important as the full picture of the plan for Detroit’s success continues to comes into focus.”
The special House Committee on Detroit’s Recovery and Michigan’s Future is having a fourth day of hearings May 20 that is to include Mayor Mike Duggan’s testimony on a package of 11 bills to provide the state’s share of the “grand bargain.” A dozen philanthropic groups have pledged $350 million toward the plan while the Detroit Institute of Arts has agreed to raise $100 million. In order for the city to receive the $816 million from the grand bargain, retirees must approve the city’s Plan of Adjustment during voting over the next seven weeks.
Here is the federal mediators’ statement:
In Jackson this morning, Governor Snyder said he would like to see the legislature move on the ‘Grand Bargain” bill this week. “I don’t know if it would be realistic to say the Senate,” says Snyder, “but again seeing the House make progress this week is important.” Our Detroit Journalism Cooperative partner Michigan Radio has the rest of the report.
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’s bankruptcy moved to Lansing, with a House committee holding hearings on a package of 11 bills. But there are, Sandra Svoboda tells Craig Fahle, some discrepancies between what’s in the bills and what’s been filed in court documents. Meanwhile, while Kevyn Orr is telling Lansing “Show me the money,” the city’s creditors tried to say “Show me the art” in court.
The Detroit Free Press’s Kathleen Gray and Paul Egan, in covering committee hearings on the bills related to financing and overseeing Detroit post-bankruptcy, bring the best opening sentence of a news story I’ve seen in a long time:
LANSING — Michigan lawmakers saw the real face of Detroit’s bankruptcy Thursday — and it was angry and confused.
The reporting was from a meeting of the special House Committee on Detroit’s Recovery and Michigan’s Future that heard testimony this week about the package of bills that would provide money and oversight to Detroit as it emerges from bankruptcy. The measures are necessary for the “grand bargain” and are included in the city’s Plan of Adjustment.
On Tuesday, Detroit Emergency Manager Kevyn Orr testified and walked lawmakers through a presentation about the city’s finances to help make his case. Here is a link to his presentation.
On Wednesday, Detroit Chamber CEO Sandy Baruah spoke, urging lawmakers to help Detroit because it would be good for the state’s economy. Other testimony came from Nick Ciaramitaro, director of legislation and public policy for AFSCME Council 25, which represents about 2,000 of Detroit’s 9,000 city employees. But Ciaramitaro said the new legislation and the most recent Plan of Adjustment conflict with the contract agreement, which means AFSCME can’t support the legislation nor the plan as they are currently written.
Then, on Thursday, came the retirees.
“You’re going to see thousands of pensioners not having health care. Long term, they’re going to lose everything,” said Keith Davis, a retiree who worked for the Detroit Water and Sewerage Department for 31 years. “Thousands of pensioners will have to go on food stamps who can’t afford food anymore. You’re going to see a lot of people give up hope.”
Another committee hearing is scheduled for Tuesday.
During a hearing today, Bankruptcy Judge Steven Rhodes said he wants Michigan lawmakers to exclude from legislation any deadlines for confirmation of the city’s plan for emergence from bankruptcy.
Here’s what he said:
“There are a bazillion things that could happen between now and Sept. 30 that would prevent us from entering an order on Sept. 30. I would hate to have to deal with the consequences of failing to meet that deadline if it’s in a piece of legislation because if it is, it would take another piece of legislation to extend it. We all know where the Legislature will be on Oct. 1, and it isn’t in Lansing. I hope somehow, someone will convey this message to the appropriate members of the Legislature to suggest reconsideration and whether it’s really necessary to have any deadline at all.”
Testimony continues today before the House Committee on Detroit’s Recovery and Michigan’s Future. On the schedule:
-Rep. David Nathan (D-Detroit)
-Greg Simmons, Saginaw pension trustee and vice president of the Michigan Association of Public Employee Retirement Systems
-Peggy Korzen, Grand Rapids pension plan administrator and MAPERS board member
-Michael VanOverbeke, general counsel from MAPERS General Counsel
Watch it live here:
The 11th bill was added this week to the package of legislation that provides funding and conditions to Detroit to help the city restructure debt and exit bankruptcy:
The special House Committee on Detroit’s Recovery and Michigan’s Future is hearing testimony today about the package of bills that would provide money and oversight to Detroit as it emerges from bankruptcy. Here’s the rundown of what’s happening:
The first remarks came from Sandy Baruah, president and CEO of the Detroit Regional Chamber.
“You are all engaged in what is perhaps the most important economic issue facing Michigan in a generation if not more than a generation. You’ll note that I said ‘Michigan’ and not ‘Detroit’ because I truly believe this is an issue for the state,” Baruah said.
He emphasized that the chamber is not funded by the city and promotes economic development in 11 counties in southeast Michigan. He cited his international travels and explained what he’s learned. “Outside of the state of Michigan, we are all viewed as one. Mackinac Island might as well be in a suburb of Kalamazoo,” he said. “When the world thinks ‘Michigan,’ they automatically think ‘Detroit.’ They are one and the same and frankly, internationally, the brand ‘Detroit’ is much better known than the brand ‘Michigan’. And in international business circles, Detroit’s reputation is surprisingly strong, still known for its manufacturing, engineering and marketing excellence.”
Next to speak was Rep. John Olumba (D-Detroit), who sponsored House Bill 5572. 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.
Committee Chair John Walsh (R-Livonia) explained how his bill, House Bill 5566 would create a seven-member panel to oversee Detroit’s fiscal operations including its finances, budgets, contracts for more than $750,000, collective bargaining agreements, debt issuance and revenue estimates.
“Yes, there is oversight, that’s no question. I think that’s a concern of many of our taxpayers,” Walsh said.
Walsh said he had talked to Detroit Mayor Mike Duggan specifically about the contract approval provision. “The mayor is working on providing us alternative language that will work,” Walsh said. “We’re working very closely with the mayor on that.”
Rep. Fred Durhal (D-Detroit) explained some of the provisions of House Bill 5575 that he introduced. Under this measure, the Michigan Settlement Administration Authority would be created to ensure the criteria are met for the state’s $194.8 million.
Committee Member Rep. Harvey Santana (D-Detroit) had concerns about the role city council would have regarding the hiring of a city Chief Financial Officer as required by House Bill 5567. “I think within the public is a bone of contention,” Santana said. He also questioned exactly what power the CFO, backed by the state oversight committee, would have.
“The council is still along with the mayor creating a budget for the city,” Walsh told Santana. “This doesn’t create unilateral opportunity for a CFO or the mayor to make those kinds of changes.”
Committee Member Rep. Michael McCready (R-Birmingham) questioned the number of contracts that would be reviewed by the oversight committee. Walsh gave more details of this conversations with Duggan, who was concerned about the high number. “The number …would create an unworkable process for the oversight committee,” Walsh said. “He’s going to try to develop a process that makes sense, something that gives the oversight committee the assurance that contracting is being done appropriately and for the benefit of the city but not gum up the works for the city and the mayor and not create a burdensome system that is unworkable.”
Rep. Thomas Stallworth was concerned about how oversight committee members are selected. The bill, House Bill 5566, calls the committee to consist of: the governor or a designee; the state treasurer; the director of the department of technology, management, and budget or a designee; a member appointed by the governor, who has knowledge, skill, or experience in the field of business or finance, including relevant actuarial expertise, and who is a resident of the city; the mayor or a designee; and two other members who live in the city and are chosen by the governor from lists provided by the Senate Majority Leader and the Speaker of the House.
“I think we would want to talk about whether more balance should be placed on the review board, especially as it relates to having the city council have some say or a designee on the review board,” Stallworth said, indicating most of the members were selected by the governor.
McCready said he shared some of Stallworth’s concerns. “I somewhat agree but I’d have to see it more laid out. The city council is such a big portion of the city of Detroit, obviously and the mayor, they’re very equal bodies, I’d say, they should have the ability to make an appointment as well and maybe not so much state appointment,” McCready said. “We may even want to consider the police and fire unions to have an appointment in this as well. This is the pensioners’ money we’re talking about.”
Next up was Nick Ciaramitaro, director of legislation and public policy for AFSCME Council 25, which represents about 2,000 of Detroit’s 9,000 city employees. The Council leadership and the city last month reached a five-year contract agreement.
But Ciaramitaro said the new legislation and the most recent Plan of Adjustment conflict with the contract agreement, which means AFSCME can’t support the legislation nor the plan as they are currently written. “At the end of last week, we felt that the Grand Bargain had been derailed,” Ciaramitaro said. “Yesterday I began to think there’s an opportunity to put this train back on the right track.”
Ciaramitaro said parts of the proposed legislation that require the city to change from traditional pensions to defined contribution plans are in direct conflict with what’s been negotiated and, if approved and made law, would be costly to the city. “Everyone loses in this provision,” he said. “We’re currently setting up a plan that was designed to fail.”
He also pointed out that the state was asking for a tremendous amount of oversight in exchange for about $200 million. “It is a lot of money, but remember that we’re dealing with pensions erasing the amount of nearly $4 billion,” he said. “We spent six months negotiating an agreement with the city and the state. The emergency manager and the governor signed off on that agreement. We support that agreement. That’s the agreement that Judge Rosen recently announced. The entire situation is in peril if the Legislature acts without recognizing what has gone on so far.”
Two representatives from the police and fire retirement system also testified. George Orzech, the group’s board chair, called for a one-time, lump sum payment from the state. “We pay out $25 million a month in benefit payments, life-sustaining benefit payments,” he said. “Your contribution would go into cash flow.”
He was joined by board member Sean Neary, who echoed Ciaramitaro’s characterization of the legislation being in conflict with mediation agreements and city court filings. “Maybe this is a little cart-before-the-horse syndrome,” he said. “Some of the bills introduced do not reflect the current Plan of Adjustment.”
At the end of their testimony, committee member McCready said this: “Thank you for your service to the city and to the state for what you do. I know you’ve had a tough situation to live under both the equipment situation and the society we live in and now add this on, it’s very challenging.”
The final speaker was Don Taylor, president of the Retired Detroit Police and Fire Fighters Association, which represents about 7,000 retired police and firefighters and surviving spouses. He pointed out to the committee that the bankruptcy mediations have resulted in the city’s obligation for retiree health care dropping from $4 billion to $450 million. Under the Grand Bargain, the $3.5 billion in pension claims is reduced to the $820 million contribution in the deal, Taylor said.
“The RDPFFA was the first group to endorse the Plan of Adjustment. The board did so knowing many of our members would not agree with that decision,” he said. “We knew that we were giving up our constitutionally protected pensions, however we did not feel it would serve the interests of anyone other than attorneys for us to engage in that ongoing, expensive legal battle.”
The committee’s chair, Walsh, ended the hearing by telling Taylor, “Putting the numbers out helps us realize how important this is.”
Another hearing is scheduled for May 15.