Detroit council approves FGIC deal
Detroit — The City Council on Thursday passed a resolution approving the city’s bankruptcy settlement with its largest remaining creditor, with council president Brenda Jones casting the lone “no” vote.
The panel voted 7-1 in support of Detroit’s deal with bond insurer Financial Insurance Guaranty Co. The agreement, reached earlier this month, resolves FGIC’s $1.1 billion claim against the city over a troubled pension debt backed by former Mayor Kwame Kilpatrick.
After the vote, Jones’ office said she intended to issue a written statement explaining her decision. Member Scott Benson was absent. Under the state’s emergency manager law, the council had 10 days after the FGIC deal to vote it up or down.
The vote came after the panel met in closed session over the settlement on Wednesday, and a day after an expert witness testified in Detroit’s bankruptcy case that elected officials’ support is critical to the city’s debt-cutting plan.
“It is another positive step that will allow the city to exit more quickly from bankruptcy,” said Bill Nowling, spokesman for Emergency Manager Kevyn Orr.
Martha Kopacz, appointed by U.S. Bankruptcy Judge Steven Rhodes to evaluate the city’s proposal to shed $7 billion in debt, said the plan is feasible but cautioned it will need buy-in from Mayor Mike Duggan and council members.
Jones’ no vote on the FGIC deal comes weeks after she took the stand in bankruptcy court in support of the city’s plan.
During her Oct. 6 testimony, Jones vowed to work with City Council colleagues, Duggan and a mandated oversight commission to implement the debt-cutting and restructuring plans. She called the spending plan for the city’s two biggest challenges — public safety and blight — “a good start,” but said more dollars would be needed.
Jones, who initially opposed the city’s bankruptcy filing, testified that services in Detroit are “less than adequate” but “improving.”
The president has also stressed that the council “did our due diligence” in reviewing the plan and she’s ready to move the city forward.
Under its agreement with the city, FGIC will replace the longtime home of the Detroit Red Wings with a hotel, riverfront condominiums and retail shops. The project, which includes the arena’s parking facilities, would aid in the transformation of a stretch of riverfront west of Cobo Center.
FGIC and a group of seven bondholders also will get $141 million in new notes.
Orr this week testified that if Detroit had continued to battle FGIC in court, and lost, “it would be fairly catastrophic from my perspective.”
Kopacz, in court Wednesday, answered questions from Rhodes on the impact of Detroit’s various settlements with creditors, telling the judge that the deals pushed the city to “the skinny end of feasibility.”
She also criticized the speed with which Rhodes has taken Detroit through the biggest municipal bankruptcy filing in U.S. history. Detroit filed bankruptcy in July 2013 with more than $18 billion in debt and could emerge next month.
Speed “is a two-edged sword. In a little over a year, the city has gone through a massive restructuring process and will have significantly (slashed debt),” she said on Wednesday. “Everybody in the city needs to get on the same page relative to what the plan is post-bankruptcy.”