CHICAGO -- The Michigan House Thursday overwhelmingly passed legislation aimed at speeding the resolution of Detroit's bankruptcy and creating oversight for the city after it exits Chapter 9.
The House passed the main piece of the 11-bill package, House Bill 5566, by a vote of 103-7. The vote came the day after a special House committee created to handle the Detroit bankruptcy unanimously passed the package.
"This legislation is the beginning of a very bright future for Detroit," said state Rep. John Walsh, R-Livonia, who chaired the special committee and has spearheaded much of the legislative effort. The House burst into applause after the package was approved.
The bills now move to the Senate. Gov. Rick Snyder, who vocally supports the measures, has called for a vote before lawmakers break for summer recess in June.
"This settlement will allow us to more quickly resolve the bankruptcy issues, and create a solid, sustainable fiscal foundation to support Detroit's continuing turnaround," Snyder said in a statement after Thursday's votes.
The legislation marks the state's most aggressive involvement in Detroit since the Motor City declared bankruptcy in July 2013. The package covers everything from the duties of the city's chief financial officer to key oversight benchmarks and future labor contracts and retirement benefits.
The legislation also authorizes a $195 million state contribution toward the city's underfunded pensions. The two bills authorizing the contribution garnered less support than the oversight bills: HB 5574 passed by a vote of 74-36 and HB 5575 by a vote of 75-35.
The state contribution is key to a so-called grand bargain upon which Detroit's entire plan of debt adjustment is built.
A group of private foundations and supporters of the Detroit Institute of Arts museum have pledged another roughly $500 million. All the funds are required by the legislation to go to the city's pension obligation. In return for its support, the city owned DIA will be spun off into an independent non-profit, a move that protects the city-owned art collection from sale or privatization.
The state will dip into its rainy-day fund for the $195 million -- dropping the account to $394 million from $589 million -- and repay it with $17.5 million annual appropriations from tobacco settlement funds.
The state money is expected to grow to $350 million over 20 years through the pension funds' investment returns.
In supporting HB 5566, legislators warned that doing nothing would lead to a worse outcome.
At least two Republican lawmakers said that Michigan taxpayers would be on the hook for social services safety net costs to retirees suffering from deep income cuts, and may even become obligated to pay the city's unfunded pension debt.
"If we fail to act we are going to subject the people who have retired and the people of Michigan to a financial train wreck the likes of which nobody has ever seen in this state and in this country," warned Rep. Jim Townsend, D-Royal Oak.
Rep. Harvey Santana, D-Dearborn Heights, asked lawmakers if they really want to "play chicken" with the situation. "Do you really want to open the gates of financial Armageddon?" he asked.
State Rep. David Nathan, a Democrat from Detroit who was the only speaker to oppose the bills and one of only seven "no" votes, said he could not support a measure that allows the state to control Detroit for 10 years or longer.
"This is something that the city of Detroit elected officials that are here will have to live with for a very long time," said Nathan. "I do not trust this will work out for the betterment of my community."
The House earlier in the day approved a bill that has emerged as one of the most controversial in the package. HB 5571 restricts the Detroit Institute of Arts from seeking renewal of a property tax levy when the current tax expires in 2022. It passed by the most narrow margin in the package: 66-to-44.
The DIA relies heavily on the tax -- approved by voters in three counties in 2002 -- to fund its operations.
Critics, including the DIA, said the bill has nothing to do with Detroit's bankruptcy exit plan, and so should not be included in the legislative package.
Snyder said the total package of bills would save taxpayers millions of dollars.
"Detroit is an important part of Michigan's identity," he said. "Let the city's resurgence show the world that Michiganders are standing together and growing stronger as we accelerate our continuing comeback."
