Monday, February 3, 2014

Surprise: Survey Finds Local Officials Not That Interested in State Aid for Detroit

Posted By on Mon, Feb 3, 2014 at 5:56 PM

Much has been said about the so-called "Grand Bargain" that intends to shore up Detroit's pension funds and prevent any sale of artwork in the Detroit Institute of Arts' collection. The plan, hatched in November by Gerald Rosen, the appointed mediator in Detroit's ongoing bankruptcy case, calls for nearly $800 million in financial assistance from a slew of nonprofit foundations, the state legislature, and the museum itself.

Upon word of the DIA's $100 million commitment last week, the plan was heralded by the Detroit Free Press as a "a potential turning point in Detroit’s historic Chapter 9 bankruptcy, helping clear a path to a less painful and faster resolution to the bankruptcy."

Sounds sticky, no? That's probably because nearly half of the fund rides on approval from Lansing. Gov. Rick Snyder announced a $350 million pledge last month, a possible "tough sell," The Detroit News reported.

And wouldn't you know it, according to a survey released today by the University of Michigan, it could be an issue. Sixteen percent of respondents from cities, townships and villages across the state supported the idea of financial assistance for Detroit, while 57 percent said they were outright against contributing aid.

They're not state represntatives, but they indicate the likely prevailing sentiment about a possible bailout settlement for Detroit. 

But, by most accounts, the state's $350 million pledge seems to be taken as a given. Detroit Emergency Manager Kevyn Orr included it in the draft bankruptcy-exit plan he shipped to the city's creditors this week. Orr faces a March 1 deadline to submit a final version of that plan to the U.S. Bankruptcy Court in Detroit.

Senate Appropriations Chairman Roger Kahn called the pledge an "uphill battle" for Snyder.

"I don't enjoy disagreeing with the governor, or disagreeing with him publicly," Kahn told us Monday, "but I do think an awful lot of us are skeptical of the do-ability of that proposal."

Kahn says the issues are aplenty: Whether or not the state legislature would support the plan, whether it would achieve the desired goal of "protecting the DIA" if Judge Steven Rhodes, who's overseeing Detroit's bankruptcy case, would approve the plan, and, if any safeguards would be built into the proposal to prevent a similar incident in the future.

"It's a moving target," Kahn says. "I have a responsibility ... to listen and vet the idea ... and I’ll try to do it fairly."

Douglas Bernstein, the area's de facto municipal bankruptcy expert, says Orr could submit the bankruptcy-exit plan that's been circulated to creditors by the March 1 deadline, but it'll likely be amended, "and that's not unusual."

"But before it gets confirmed, [Orr is] going to have to demonstrate that the money’s real and it’s there," Bernstein says. "'Cause in order to get a plan confirmed, he has to demonstrate capability."

Considering everyone, including Orr, appears to believe Detroit City Council will vote to remove him in September, the expedited timeline puts pressure on everybody, Bernstein says.

"That's not a bad thing, necessarily," he says. "It increases the stress level."

 

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