June 20, 2014 at 11:26 pm

Snyder signs 'grand bargain' legislation amid fanfare

Gov. Snyder signs grand bargain legislation
Gov. Snyder signs grand bargain legislation: Governor hails historic measure to aid Detroit.

Detroit — Calling it “an important milestone” in Detroit’s comeback, Gov. Rick Snyder on Friday morning signed legislation that adds $195 million in state aid to a pool of $466 million in private funds to help the city emerge from bankruptcy.

Snyder signed the so-called “grand bargain” bills during a ceremony in the former Globe Trading Building, which the state Department of Natural Resources is transforming into an Outdoor Adventure Center through a $13 million public-private partnership.

The grand bargain is intended to limit cuts to city pensions and protect Detroit Institute of Arts masterworks from being sold.

The setting on the banks of the Detroit River was symbolic of efforts to reverse decades of decline in Detroit. Lawmakers, elected Detroit officials and foundation leaders attended the event.

“Today we’re going to achieve an important milestone in the comeback of Detroit,” Snyder said. “While we celebrate today, we recognize there’s more work to do.”

Detroit’s 32,000 retired and active workers with earned pension benefits have until July 11 to return ballots and decide whether to accept the state and private funds in exchange for smaller-than-expected pension cuts and giving up their legal rights to continue litigating over a central issue in Detroit’s bankruptcy.

Financial creditors facing hundreds of millions in losses have waged a legal assault on the bargain. The plan will go on trial in mid-August — the second milestone the governor referred to — and U.S. Bankruptcy Judge Steven Rhodes must still determine whether it’s fair and equitable to all unsecured creditors.

Chief U.S. District Court Judge Gerald Rosen, architect of the bargain, on Friday urged retirees to vote “yes” on the city’s pension-cutting plan of adjustment.

But the lead bankruptcy mediator cautioned against over-celebrating the accomplishment of securing state aid for Detroit pensioners through a bipartisan vote in the Legislature.

Earlier in the day, Snyder pushed Detroit’s proposed bankruptcy settlement onto a national stage, saying the state’s infusion of $195 million into city pensions will “cushion the blow to retirees” facing reduced lifetime benefits. Snyder touted the deal on MSNBC’s “Morning Joe” and CNN in live interviews from the Detroit riverfront.

“Detroit’s coming back and this will help accelerate that,” the Republican governor said on MSNBC.

Base pension cuts for non-uniform retirees will be 4.5 percent if city workers and retirees vote to accept Emergency Manager Kevyn Orr’s debt-cutting plan. Their pension cuts could swell to 27 percent or more if they vote down the plan before the bankruptcy court ends voting on July 11.

If active and retired police and firefighters approve the plan, their base pensions will not be cut, but their annual inflationary raise will be reduced from 2.25 percent to about 1 percent. If police and firefighters reject the deal, their annual cost-of-living increase will be eliminated entirely, according to the plan.

For the grand bargain to succeed, a majority of both classes of pensions must vote yes and be owed at least two-thirds of the pension debt among those who voted.

Orr said a no vote only opens the door for the financial creditors to push to get more for themselves and potentially prolongs the bankruptcy proceedings for years.

“I can guarantee you that the creditors that currently are fighting very hard in the bankruptcy will argue that the beneficiaries of the pensions got an opportunity to help themselves and they said no, and now it’s the financial creditors’ turn,” Orr said.

Earlier this month, the Michigan Legislature approved $194.8 million in aid for Detroit pensioners. Lawmakers attached several strings for the money, including creation of a new state-dominated, nine-member Financial Review Commission with veto power over city spending plans for at least three years.

Retirees supporting Orr’s plan used the bill-signing ceremony to urge a yes vote.

Shirley Lightsey, president of the Detroit Retired City Employees Association, said if members vote no “you will have no sympathy from anyone.” Her group distributed “VOTE YES” buttons at the event.

Don Taylor, president of the Retired Detroit Police and Fire Fighters Association, added: “There is no good alternative.”

Gov. Snyder, center, holds up the bill after signing it this morning. / Clarence Tabb Jr / The Detroit News
Gov. Rick Snyder signs the bill in a ceremony with state and local ... (Clarence Tabb Jr. / The Detroit News)