Michigan Governor Rick Snyder asked legislators to back at least $330 million over 20 years to help Detroit emerge from bankruptcy, matching an offer floated this month by a group of private foundations.
Snyder, a Republican, wants the state to match the gifts from the foundations and other donors, according to a person who requested anonymity because of confidentiality rules in mediation talks. The deal would preserve pensions for Detroit retirees and avoid the need to sell works in the Detroit Institute of Arts to pay creditors, the person said.
The proposal marks a new direction for a governor who has said he opposed a state bailout that focuses only on reducing the city’s $18 billion in debt. Republicans dominate the legislature, while Detroit, the decayed auto-industry powerhouse and the state’s largest city, has been a Democratic stronghold for decades.
“The governor thought it was important to start a discussion with lawmakers,” in light of the foundations’ offer, said Sara Wurfel, Snyder’s spokeswoman, in an e-mail. “Any additional participation from the state -- beyond numerous, substantial and targeted other ways Michigan is assisting the city -- would be in partnership with the legislature.”
Wurfel wouldn’t disclose details of Snyder’s plan, citing confidentiality agreements.
The person familiar with the plan said that, with state money, the total could reach $1 billion if private donors contribute and the state matches them. The state’s contribution could come from a bond sale or an annual allocation it gets from a 1998 court settlement with tobacco companies, the person said.
Detroit filed for bankruptcy in July, claiming it cannot pay about $18 billion in debt while providing essential services to the city’s almost 700,000 residents. Creditors have pressed city officials to consider selling some art or finding some other way to use the art institute to raise money.
Nine private foundations this week pledged $330 million to protect Detroit’s pensions and art collection, the result of mediation led by U.S. District Judge Gerald Rosen. Kevyn Orr, the emergency financial manager Snyder appointed for Detroit, has said the city’s two pension funds are underfunded by $3.5 billion and retirees would probably face cuts.
Republican lawmaker John Walsh, who represents a Detroit suburb, said yesterday that he’s open to aiding the city as an investment that will help Michigan. He said the $330 million gift from foundations may make it easier to persuade the state to pitch in financially as well.
“If there’s a global settlement, it may be dollar-for-dollar better for the state to make a resolution, participate now, than to kind of take a wait-and-see stance or to allow the bankruptcy to proceed without any involvement,” Walsh said in an interview at the North American International Auto Show in Detroit.
The governor’s proposal, along with the foundations’ offer, opened a new phase in the largest-ever U.S. municipal bankruptcy. Rosen, the mediator, met with Michigan’s top two Republican lawmakers last month to gauge their willingness to help resolve the case. Talks with lawmakers are continuing, a person familiar with the matter said.
The bankruptcy is politically sensitive, as lawmakers have proposed using a $971 million surplus to cut taxes.
“There simply has not been the willingness shown by the Republican legislature to want to help Detroit out financially during the entire proceeding of the bankruptcy,” said Larry Dubin, a professor at the University of Detroit Mercy School of Law.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).