CHICAGO — A historic package of nine bills aimed at helping resolve Detroit's bankruptcy heads to Michigan Gov. Rick Snyder's desk after a speedy passage through the Senate Tuesday.
The House passed the package two weeks ago.
The legislation marks Michigan's most aggressive intervention yet into Detroit's Chapter 9, the largest municipal bankruptcy in the U.S. The city declared bankruptcy July 18, 2013.
It authorizes a $195 million cash payment from the state to the city's pension funds as part of a deal to protect the city's art collection in a so-called "grand bargain" crucial to Detroit's bankruptcy exit plan.
It also sets up an oversight board that will govern the post-bankrupt city and enacts a host of other provisions, including future labor contracts, retirement benefits, and duties of the chief financial officer.
"This is a great day in Michigan history," Snyder said in a press conference after the Senate vote. Snyder was joined by several lawmakers, Detroit Emergency Manager Kevyn Orr, and U.S. Chief District Judge Gerald Rosen, the head mediator in the case who has taken the lead in crafting the grand bargain.
"This will allow the grand bargain to move forward ... and this fall we can say the bankruptcy is resolved and everyone is focused on the growth of the city," Snyder said.
The governor, who doesn't usually comment on bills, waved his pen in the air and vowed he would sign all nine as soon as they get to desk.
Rosen, in his comments, said judges don't typically meet with the media but that he would make an exception because "this is so important."
"We've set a template for how things can be accomplished in a political environment and in a nonpolitical way," Rosen said. "And speaking from the non-political branch of government, I have to say how proud I am to have worked with [lawmakers]," he said.
He joked that he and Orr probably talk with each other more than with their wives.
Like Snyder, Rosen said there's more work to be done before the case is resolved. But he struck an optimistic note, saying that "there's a lot of capital circling around Detroit," and "we all know the platform for Detroit has a great future."
Creditors still need to vote on Detroit's plan of confirmation and the city still needs to get through a trial on the plan, set now to begin July 24, noted Snyder. He urged retirees to vote for the plan. "A protest vote is not helpful," said Snyder. "I'm sending a clear endorsement for a 'yes' vote."
The nine-bill package sailed through the Senate in a matter of hours, much as it had in the House May 22.
The financial measures authorizing the $195 million payment passed by a narrow margins of 21-to-17, while the oversight bills were approved by larger majorities.
"Today's vote by the Senate to approve $195 million in financial aid for the city of Detroit will help us honor the contract we made with our city retirees," Mayor Mike Duggan said in a statement. "The kind of bipartisan support we are seeing in Lansing right now is a clear sign of a new beginning for the city of Detroit."
State Sen. Coleman Young II, D-Detroit, was the only senator to vote against all bills. In a speech before the voting began, Young said the oversight provisions stripped Detroit residents of their voting rights. The lack of a defined exit for the board means the city could be ruled by the state "until the apocalypse comes," he said.
"There's no time that it is okay for you to take away the rights of people to vote," Coleman said.
In addition to the $195 million, the grand bargain includes $366 million from various non-profit foundations and $100 million from the DIA, as well as other private contributions. All the other money was contingent on the state contribution, and on the provision that the money goes only toward the pensions and no other creditors. The city has reached settlements with many of its major labor creditors based on the deal, which also calls for all current and future lawsuits against the state to be dropped.
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.
Earlier Tuesday, a key Senate committee speedily passed the bills and sent them on to the full Senate floor. A controversial bill that would have prohibited the Detroit Institute of Arts from renewing a property tax millage died when the senators failed to take action on it.
The committee voted on the bills after about an hour of testimony. Most spoke in favor of the measures. Several business leaders from Detroit and across the state as well as representatives of retirees and pension systems spoke in favor of the bills.
"Detroit is finally seeing a comeback," Brad Williams from the Detroit Regional Chamber of Commerce said. "The problems of the city are being solved, slowly but surely. The price tag of this legislation is far better than the price tag of doing nothing."
Opposing the legislation was the conservative group Americans for Prosperity-Michigan, who characterized the $195 million contribution as a bailout. Annie Patnaude, AFP-Michigan's deputy state director, said the state should withhold the money from the city much as she withholds her son's Batman toys as punishment for his naughtiness.
"If we can't hold Detroit responsible, we don't believe there's going to be any meaningful change," Patnaude said.
Like many bond insurers, AFP is pushing for the city to consider selling more of its assets, including the art collection, to boost the pot of money available to creditors.
"What's more important," Patnaude asked, "a painting on a wall or someone's pension?"
Senate Majority Leader Randy Richardville, R-Monroe, argued that liquidation of the art collection would not necessarily mean greater recoveries for pensioners. "It would take years, but let's just say it takes one day, and it's sold for $1 billion," Richardville said. "That money goes immediately to the federal bankruptcy. It doesn't go to the grand bargain Detroit would be left with no art and no DIA and no relief for the pension problems we're talking about today," he said. "That's why this deal has been crafted the way it has."
