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Author
David Eggert
Date
January 16, 2014

Mich. governor floats state assistance for Detroit

LANSING, Mich. (AP) — Gov. Rick Snyder met with Michigan lawmakers Thursday to discuss the possibility of contributing state money to shore up Detroit’s pension plans and prevent the sale of city-owned art, days after foundations committed $330 million to the effort.

The Republican governor spoke with the senators behind closed doors and may soon ask the GOP-controlled Legislature to match the foundations’ contribution over a number of years, possibly in his February budget proposal but not during his State of the State speech Thursday night. Senate Majority Leader Randy Richardville confirmed the talks about state involvement but said no final plan or request has been made to legislators, nor have they made any commitments.

He said he was “cautiously optimistic,” however, that a solution “will come forth sometime in the near future.”

“Detroit is hugely important to everybody in this state,” Richardville said.

National and local foundations are committed to providing $330 million to prevent the sale of city-owned art at the Detroit Institute of Arts and soften cuts to pensions of Detroit retirees.

Emergency manager Kevyn Orr, who runs Detroit, says two pension funds are underfunded by $3.5 billion. A deal involving the state and foundations would help retirees but probably wouldn’t alleviate all their pain in the final plan to fix $18 billion in long-term debt.

Also Thursday, the bankruptcy judge overseeing Detroit’s restructuring plans to issue his decision on a renegotiated interest rate swaps deal that could save Detroit millions of dollars. Judge Steven Rhodes will rule from the bench on the $165 million deal reached last month with UBS and Bank of America Merrill Lynch.

To agree to send money to the bankrupt city, lawmakers would likely seek conditions. Richardville mentioned interest in seeing Detroit Institute of Arts pieces in other museums around the state and outside oversight of what critics says are mismanaged city pension funds.

Asked about political resistance to a state financial package for Detroit, particularly from out-state residents, Richardville said “people would be most understanding if we’re talking about protecting pensioners vs. bailing out a city. And I think that’s what our conversation is mostly going to be about. It’s going to be about people’s pensions — being secure in their pensions — vs. bailing out a city that couldn’t control its own spending.”

Richardville and another top legislative leader, House Speaker Jase Bolger, met in December with U.S. District Judge Gerald Rosen, who is serving as chief mediator between the city and its creditors while the bankruptcy case moves forward.

Snyder has previously said Detroit shouldn’t expect state money to help with the bankruptcy but told The Associated Press on Tuesday that the foundations’ commitment is “unprecedented.”

“It’s not just the art, they’re aimed at helping the pensioners,” he said. “I appreciate that effort. Beyond that I really can’t comment because I’m under the mediation order of confidentiality. If you step back and look I would rather see things settled than continue to go through litigation.”

Snyder also met privately with many lawmakers on Wednesday.

Sen. Rick Jones, a Republican from Grand Ledge, said he was willing to study the concept being floated but expressed concern about setting a precedent. Other Michigan cities and governments also are facing pension problems, though none are in bankruptcy — where pensions safeguarded by the state constitution aren’t immune to cuts.

“I will be very reluctant to vote for mid-Michigan taxpayers to send money to Detroit,” Jones said.

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Associated Press writers Jeff Karoub and Ed White in Detroit contributed to this report.

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