“Detroit already receives special treatment from Lansing,” writes state Rep. Greg McMaster (R-Kewadin) in an opinion piece published in today’s Detroit News explaining why he’ll vote against Gov. Rick Snyder’s proposed $350 million (over 20 years) for Detroit’s bankruptcy restructuring.
The $350 million commitment is part of Emergency Manager Kevyn Orr’s proposed Plan of Adjustment and one of the elements of the “grand bargain”: the $815 million deal that puts money from the state, private foundations and the Detroit Institute of Arts toward funding pensions in exchange for protecting the museum’s art collection from sale.
McMaster writes that he considers the $350 million “unfair” to local taxpayers and other local governments. He also says it “creates a troubling precedent.”
Far from the claim that the state has been neglecting Detroit, the state has been propping up Detroit for years. And what have Michigan taxpayers received for their generosity? Epic corruption and fiscal mismanagement.
I want Detroit to be successful. And I believe the city has turned a corner.
But northern Michigan has needs too. Our taxpayers can no longer be the state’s piggy bank. And until the state returns its $971 million surplus to taxpayers, reduces the size of government and distributes state funding more fairly, I cannot support this $350 million bailout of Detroit.
Will McMaster’s opinion prevail in the legislature as out-state politicians reflect his view? Or will the Governor successfully lobby for the city? With a vote expected before summer, Detroit will know in the next few months.
Detroit city officials have until July 2 to determine what to do with 12 commercial leases, including several police precincts and mini stations. The Detroit News reports that the properties include some Detroit Water and Sewerage Department sites as well as police ministations and precincts:
City officials are analyzing the leases and might decide the relocate some departments to new offices, Detroit bankruptcy lawyer Heather Lennox said. “The planning is ongoing and they still need a little more time,” Lennox told the judge.
Both Crain’s Detroit Business and the Detroit Free Press published pieces about the solicitation for private bids for the Detroit Water and Sewerage Department by Emergency Manager Kevyn Orr.
With negotiations with suburban counties deadlocked, the City of Detroit has issued a request for offers from private companies to operate and manage the Detroit Water and Sewerage Department. … Orr, who is steering the city through the largest municipal bankruptcy in the nation’s history, said the city has a duty to its creditors to explore all options, especially since the city’s proposal for the creation of a regional authority with Oakland, Macomb and Wayne counties is stalled.
Meanwhile, in coverage of Orr’s speech at the University of Michigan Tuesday, Crain’s Amy Haimerl wrote:
…Orr also cautioned not to read too much into a recent request for proposals that the city put forward late last week with prospective private sector buyers to purchase or lease and manage the assets of the Detroit Water and Sewerage Department. The department, which has about $6 billion in debt of its own, comprises nearly 3,000 miles of pipes and connectors over more than 1,000 square miles, and talks about forming a regional authority to manage its assets after bankruptcy have recently stalled.
A 21-page request for information obtained Tuesday by Crain’s calls for interested bidders in a possible sale or lease of the department’s water and sewer network to submit bids by June 1, with a possible award to a bidder coming in August. But Orr characterized that request Tuesday as one option the city could pursue, among many.
“We would like to have the (surrounding) counties at the table, they account for 65 percent of (department) revenue,” Orr said, but went on to add that Detroit must also demonstrate to U.S. Bankruptcy Judge Steven Rhodes that it “looked at every available option…to raise revenue” for the city, before a confirmation hearing begins in late July.
Is Royal Oak Township next?
In the wake of Gov. Rick Snyder’s confirmation that a financial emergency exists in Royal Oak Township (not to be confused with the city of Royal Oak…), the Metro Times opined about the possibility that the .5-square-mile municipality could be the next Michigan locale to file for Chapter 9 bankruptcy. Under Public Act 436, the existing law that addresses local financial emergencies and emergency manager powers, the township may pick an emergency manager, petition for Chapter 9 bankruptcy, neutral mediation, or a consent agreement, the alternative newsweekly writes, continuing:
… the treasury had found the township failed to submit an annual budget, owes hundreds of thousands of dollars on police services, and overspent more than $500,000 than what it had in its coffers last year. Whichever solution is eventually pursued, the situation isn’t pretty.
Message to the unions
Many media reported about Emergency Manager Kevyn Orr’s speech Tuesday at his alma mater. Here’s what the Detroit News led with:
Detroit Emergency Manager Kevyn Orr on Tuesday amped up the pressure for a bankruptcy deal, warning unions that funds pledged toward pensions are at risk and proceeding with plans for a privately run water department. Orr … urged the city’s unions to reach an agreement on bankruptcy terms soon or risk the loss of more than $800 million in funding to shore up pension funds.
In the second of three necessary steps, the Michigan Local Emergency Financial Assistance Loan Board Tuesday approved a $120 million loan for the city of Detroit from Barclay’s of London. The funds, backed by the city’s income tax revenue as collateral, will be used for city operations including blight removal, public safety and computer system upgrades.
The city council previously approved the loan. In the final step, U.S. Bankruptcy Judge Steven Rhodes will consider it, and a hearing is set for April 2. On Monday, Rhodes ordered the city to provide additional information about how it would spend the $120 million from Barclay’s.
The state Emergency Loan Board has representatives from the Treasury Department, the Department of Technology, Management and Budget, and the Department of Licensing and Regulatory Affairs.
Borrowing approved in this deal represents renegotiated terms of an earlier plan between the city and the London-based bank that fell through. Under the earlier proposal, which wasn’t supported by emergency manager Kevyn Orr, Detroit had hoped to borrow $350 million by pledging its casino tax revenue.
Under the new plan, Detroit no longer is putting up its casino revenue as collateral, an issue that undercut the prior deal. It also avoids $230 million in borrowing to pay off a controversial transaction brokered by ex-Mayor Kwame Kilpatrick to cover pension debt.
The new Belle Isle Advisory Committee will hold another public meeting from 9 to 11 a.m., Thursday, March 27 at the Dossin Great Lakes Museum on the island.
On the agenda: reviewing how the Department of Resources will make decisions and communicate about the park’s events, rules, regulations and infrastructure project planning; and scheduling “public listening sessions.” There also is time for public comments during the meeting.
As part of Detroit’s restructuring, the island park was taken over by the DNR and is operating as a state park. The Belle Isle Advisory Committee, made up of local volunteers, advises the state about Belle Isle’s operations, improvements, planning and public safety efforts.
More information may be found at www.belleislepark.org.
“Cue a rush of resumes,” writes Nathan Bomey in the Detroit Free Press about Bankruptcy Judge Steven Rhodes’s order seeking an expert municipal finance witness in the city’s bankruptcy trial.
Rhodes issued the “job posting” Monday, writing
The Court seeks to appoint an expert witness who:
a. Has outstanding qualifications in municipal finance and budgeting to provide an
opinion regarding the feasibility of the City’s plan of adjustment.
b. Has outstanding qualifications in municipal planning to provide an opinion
regarding the reasonableness of the assumptions that underlie the City’s cash flow
forecasts and projections.
c. Is able to give an opinion that is based on sufficient facts or data and that is the
product of reliable principles and methods and the application of those principles
and methods to the facts of the case.
d. Is willing and able to exercise fair, unbiased and independent judgment in the
The city would pay the witness’s compensation as approved by the court. A hearing on the order will be held April 2.
Here’s the judge’s order:
The Manhattan Institute for Policy Research livestreamed its Monday event, “Detroit: The Next American City of Opportunity,” but in case you missed that, here’s the coverage from Detroit’s daily newspaper.
The Detroit News in this report focused on “the upbeat assessment” offered by Gov. Rick Snyder and Emergency Manager Kevyn Orr during the hour-long forum.
During the nearly hour-long event, Snyder and Orr discussed the unsustainable legacy costs that helped drive Detroit into bankruptcy; the improvements already under way as part of the city’s restructuring; and the need for local, state and federal leaders to work together to sustain change. They also agreed that schools must improve to attract and keep families in the city. Snyder praised new Detroit Mayor Mike Duggan as “fully engaged,” saying he’s working well with Orr, who was appointed emergency manager last March.
The Detroit Free Press, meanwhile, focused on the potential events in the near future here in Detroit.
Detroit emergency manager Kevyn Orr said he hopes to secure enough support “within the next couple of weeks” to achieve a consensual resolution to the city’s Chapter 9 bankruptcy, but he warned that time is running out. … With creditors’ support, the city’s restructuring could speed quickly through a trial starting July 16, when U.S. Bankruptcy Judge Steven Rhodes will consider approval of the plan. But without creditors’ support, the city may attempt to implement a forcible restructuring plan in a legal process called a “cram-down.”
MLive columnist Rick Haglund found himself in the Los Angeles area on personal business, but used his time there to take a look at the similarities and differences between Michigan’s and California’s financial situations and municipal bankruptcies in this column.
Both states have faced statewide budget challenges and had cities in bankruptcy: Detroit, of course, Michigan, with Stockton and San Bernardino on the west coast. Both states have governors who have led aggressive efforts to remedy state budget deficits.
But the methods used by the states to deal with their financial issues, Haglund writes, are vastly different.
California’s scary budget deficit has been erased, mainly through an income tax hike on the rich that voters approved in 2012… Michigan has taken a different tack in its recovery course. Snyder’s first budget in 2011 cut taxes for businesses, and raised them for pensioners and many low-income families.