May 22, 2014 at 1:00 am

Detroit's 'grand bargain' advances in Michigan Legislature

Michigan House Speaker Jase Boger, R-Marshall, talks over Detroit bailout bills in a huddle of Republicans on Thursday on the House floor. (Dale G. Young / The Detroit News)

LansingWith overwhelming bipartisan majorities, the Michigan House on Thursday approved $194.8 million in aid for Detroit pensioners as part of an 11-bill package that imposes post-bankruptcy state oversight of the city for at least 13 years.

Gov. Rick Snyder urged the Republican-controlled Senate to act quickly on the package, which is moving through the Legislature as Detroit’s creditors are weighing whether to approve the city’s plan to shed $9 billion in debts.

“This truly is an opportunity to say ‘Let’s change the direction of Detroit,’ ” Snyder said at a Capitol news conference.

The House passed the bills creating long-term oversight of city finances and appropriating the pension money in lopsided majorities Thursday afternoon, after a more divisive vote to bar the Detroit Institute of Arts from seeking a future millage renewal.

“This is about helping people and it’s about establishing a value system that respects people and takes care of them when they most need us,” said state Rep. Thomas Stallworth III, D-Detroit. “It says that we care about people first.”

Lawmakers heeded Emergency Manager Kevyn Orr’s warning that the city’s general retirees could face pension cuts of at least 27 percent if they don’t approve tax dollars for a bankruptcy settlement fund.

The state aid could help limit non-uniform retirees’ pension cuts to a minimum 4.5 percent; police and firefighters would see their 2.25 percent annual inflationary pension raise cut to 1 percent.

Rep. Jim Townsend, D-Royal Oak, said failure to approve the money would subject thousands of Detroit pensioners across the state “to a financial train wreck the likes of which nobody has ever seen in this state.”

As the bills head to the Senate, the DIA restriction faces a powerful opponent: Majority Leader Randy Richardville.

“Personally, I don’t think we as a state should be telling municipalities what kind of millages they can ask voters for support for,” Richardville told The Detroit News.

“I feel the arts should be protected. It makes us better as a city and as a state. I don’t think it’s something I could support, but I realize it’s part of a package.”

With the Senate in the midst of a debate over Richardville’s gas tax increase, the Monroe Republican made no commitment Thursday to immediately tackle the Detroit bills.

“We’ve been dealing with some other complex issues in the Senate, the roads package and the minimum wage legislation,” Richardville said.

Opponents plan to lobby

Snyder, who has led Detroit through a 10-month bankruptcy, praised the House’s action.

“I think there’s value in moving quickly, but I want to respect the Senate,” Snyder told reporters. “And it’s their prerogative on how they want to handle the matter. One thing that could be important for them to look at is the margins this was passed with.”

If approved by the Senate, the state contribution would be added to a $466 million pool of funds 12 regional and national foundations and the DIA have pledged to raise for city pensions over the next two decades.

The state director of Americans for Prosperity said the conservative group would lobby senators against the “grand bargain,” arguing there is more money to be had from selling Detroit’s vast art collection, water department and other assets.

“The city is sitting on billions of dollars in assets and those assets should be leveraged for the benefit of pensioners,” AFP Michigan Director Scott Hagerstrom said Thursday.

Controversial restrictions

Lawmakers have attached strings to the $194.8 million, which would be paid out only if retirees approve the pension cuts they face and U.S. Bankruptcy Judge Steven Rhodes approves the city’s debt-cutting plan.

The House voted 103-7 in favor of a new nine-member commission to have broad oversight of Detroit’s finances after it emerges from bankruptcy.

The financial review commission would be dominated by Snyder appointees and have to approve budgets and large contracts for the next three years. Mayor Mike Duggan and City Council President Brenda Jones would each have a seat on the commission or be able to appoint a designee.

Most of the controversy and protests from Democrats in the minority party came when House leaders brought up the DIA bill for a vote.

The House voted 66-44 to prevent the DIA from seeking approval from voters in Macomb, Oakland and Wayne counties to extend its 0.2-mill property tax after it expires in 2022. The millage produces $23 million in annual revenue for the DIA

Rep. Ken Goike, the bill sponsor, said his northern Macomb County voters largely rejected the DIA millage and should get a property tax break for aiding city pensioners in Detroit’s bankruptcy.

“The taxpayers in my district deserve some relief,” Goike, R-Ray Township, said on the House floor.

Democrats decried the legislation as an attempt to silence voters.

“I was hoping this Detroit package of bills would rise above the level of political retribution,” said Rep. Jon Switalski, D-Warren.

Detroit Reps. John Olumba and David Nathan joined five out-state Democrats and all 59 House Republicans in voting “yes” on the DIA bill.

Bipartisan criticism

During the House session early Thursday afternoon, the Republican majority defeated a Democrat’s amendment that would have gutted Goike’s bill.

“This bill has absolutely nothing to do with supporting and settling the city of Detroit’s bankruptcy,” said Rep. Sarah Roberts, D-St. Clair Shores.

Republican and Democratic lawmakers from Metro Detroit alike expressed displeasure with the Goike bill, which seeks to eventually end taxpayer support of the Detroit museum after its city-owned assets are spun off to a private entity.

“The Goike bill is probably my least favorite, and we’re still discussing (it),” said Rep. Gail Haines, R-Lake Angelus. “But I have always supported the settlement for Detroit.”

The DIA bill is not legally tie-barred to the pension aid and other requirements, meaning the Senate could ax it from the package.

Snyder would not say whether he would sign the DIA bill. He also declined to weigh in on whether the bill is a necessary part of the pension aid and oversight package.

“I’m not going to speculate on that,” Snyder said.

The Michigan House on Thursday passed an 11-bill package tied to $194.8 million in aid for Detroit pensioners in the city’s bankruptcy. Here’s a rundown of the bills and the vote margins:

HB5566: Approved 103-7

■ Creates a nine-member Financial Review Commission that would police Detroit’s finances for at least three years after the city exists bankruptcy. The commission would go dormant if the city can meet certain fiscal benchmarks.

HB5567: Approved 105-5

■ Requires commission to approve the mayor’s choice for a chief financial officer.

HB5568: Approved 85-25

■ Caps city contribution to employee retirement plans at 7 percent of their base pay. Also caps contributions for retiree health insurance savings plans at 2 percent of pay for employees hired after July 1, 2023.

HB5569: Approved 100-10

■ Limits city contribution toward employee health insurance plans at 80 percent of premiums costs.

HB5570: Approved 105-5

■ Requires Detroit’s retirement systems to establish new investment committees, which could hire and fire the pension funds’ chief financial officer. The bill also restricts out-of-state travel by trustees and pension fund staff.

HB5571: Approved 66-44

■ Prevents the Detroit Institute of Arts from seeking a 10-year millage renewal in 2022 when its existing 0.2-mill property tax expires.

HB5572: Approved 75-35

■ Appropriates $194.8 million from state’s rainy day fund to Detroit pension funds.

HB5573: Approved 77-33

■ Replenishes rainy day fund with $17.5 million in payments from state’s tobacco settlement fund for 20 years.

HB5574: Approved 74-36

■ Transfers state money to Detroit pension funds.

HB5575: Approved 75-35

■ Creates new authority to govern transfer of state money.

HB5576: Approved 98-12

■ Requires report on police and fire arbitration be sent to oversight commission.

clivengood@detroitnews.com
(517) 371-3660

A DIA visitor walks past The Wedding Dance, a oil painting by Netherlander ... (Daniel Mears / The Detroit News)