CHICAGO — Michigan lawmakers unveiled a package of 11 bills Thursday aimed at hastening Detroit's exit from bankruptcy and managing the city's post-Chapter 9 recovery.
The bills would, among other things, create a seven-member committee to oversee Detroit for 20 years and authorize a state contribution of $195 million in a one-time lump cash infusion. The money would come from the state's rainy-day fund.
The legislation features a host of requirements for state's largest city, including that it hire a chief financial officer, implement certain pension and health care reforms, and create an investment committee to advise the city's two pension funds. The bills are a key part of Detroit's plan to exit the nation's largest Chapter 9 case by the end of September.
The financial contribution is part of a so-called grand bargain in which Michigan, a group of private foundations, and the city owned Detroit Institute of Arts museum raise $816 million for the city's pension debt. In return, the DIA would be spun off to an independent nonprofit board that would protect the art collection from any future sale or privatization. Most of the settlements Detroit has reached with its creditors rely on that infusion of cash.
House leaders pledged that the legislation would move quickly. Gov. Rick Snyder wants lawmakers to pass legislation before they break at the end of June.
"This bill package has been meticulously crafted with a key goal in mind: how do we settle Detroit's bankruptcy while ensuring the city doesn't fall into financial ruin again?" Rep. John Walsh, R-Livonia, said in a statement. "The oversight requirements and pension reforms contained in these bills are safeguards to assure the taxpayers that Detroit will not return to poor financial management."
Three of the bills would create the Oversight Commission Act.
The state would control most of the appointments to the commission. Members would be appointed by the governor, state treasurer, state House speaker, state Senate Majority Leader, and the Detroit mayor. The board will have power to approve labor contracts, debt issuance, and ensure compliance with state laws tied to local government finance.
The commission is modeled after the board that oversaw New York City during that city's late 1970s fiscal crisis, legislators said in a press package outlining the bills.
"Like NYC's financial control board, this commission will go 'dormant' when the city meets certain criteria demonstrating fiscal responsibility," the press release said. It would automatically become active upon certain events, such as the city incurring significant budget deficits, or violating state law regarding balanced budgets or debt issuances.
The oversight bills would also require the city to have a chief financial officer who will handle day-to-day financial operations. Detroit would also be required to annually adopt a four-year financial plan and hold revenue estimating conferences modeled after the state's conferences.
Three of the bills deal with various pension reforms and management.
The bills would require the city to switch to a defined contribution plan from a defined benefit plan for new employees.
One bill prohibits Detroit from opting out of the 80/20 "hard cap" that sets the employer-employee contribution rates for health care premiums. The city would also be prohibited from providing retirement and health care benefits to new employees that are greater than the benefit levels offered to state employees.
An investment committee will be created in the city's plan of adjustment that will recommend pension decisions to the boards and has the power to overrule the pension boards.
One bill would prohibit the Detroit Institute of Art from approving a new millage or renewing its existing millage.
The legislation dealing with the state contribution covers four bills.
The $195 million lump sum payment is a change from Snyder's original proposal, in which the state was to contribute $350 million over 20 years. Snyder had proposed bonding against the tobacco funds to generate the proceeds. The new amount reflects the net present value of the $350 million over 20 years with a 6.75% discount rate, the state said.
Under the bills, the money would come from Michigan's budget stabilization fund, which currently has a balance of just under $700 million, according to the state. The borrowing would be repaid with annual appropriations of $17.5 million from the state's tobacco settlement fund.
The legislation would create the Michigan Settlement Administration Authority to oversee the contribution and its criteria.
House leaders earlier this week formed a new committee to handle the Detroit-related legislation, chaired by Walsh. The House Committee on Detroit's Recovery and Michigan's Future will be made up of two Republicans and two Detroit Democrats. Its first meeting will be held May 13.
The legislation applies only to cities with populations of 600,000, meaning Detroit is the only city to which it applies, limiting other Michigan governments from tapping its authority, lawmakers said.
