Council OKs restructuring deals
Detroit — The City Council on Friday approved two critical agreements tied to Detroit's bankruptcy restructuring and denied a third proposal to transfer vacant city-owned lots to the land bank.
Citing the dire condition of the Detroit's water department, City Council members voted 7-2 in favor of the creation of a regional authority that will guarantee millions each year for infrastructure upgrades. Additionally, the panel unanimously — and without discussion —signed off a comprehensive bankruptcy settlement between Detroit and its most aggressive bankruptcy creditor, Syncora Guarantee Inc.
But the council turned down a request to authorize the transfer of 45,000 vacant lots to the Detroit Land Bank Authority after raising questions about the new entity's capacity to manage the parcels and frustration that the deal was essentially moving ahead without their approval.
Water deal OKd
The most fiery debate among the residents, activists and political leaders who packed Friday's special session centered around plans for the Great Lakes Water Authority, which calls for Detroit to maintain ownership of the water system while giving suburbs more of a stake in its operations.
The council primarily focused on the positives in the deal. But President Brenda Jones and Member Mary Sheffield voted against it.
"It's not a perfect deal. It's not a horrible deal," said Councilman James Tate, who voted yes. "But it is the only deal we have in front of us at this point that I believe is feasible."
Member Andre Spivey added: "When you go through rough times, you have to make decisions that are not always popular, but are necessary."
The vote on the authority comes days after Mayor Mike Duggan gave a detailed presentation to the panel and urged them to support the plan.
Sheffield said she understood the need for upgrades to the system and commended Duggan's efforts, but said elements of the deal are "misleading" and she's "not sure this is the best decision."
During public comment, activist Morris Mays regarded the deal as a give away of Detroit's water department, calling it a "crying shame."
"It belongs to the city of Detroit. The city of Detroit is being given away by this council," Mays told members. "The city is under attack. Everything is gone. It's you all who've done it. I have no respect for you."
But others, including former Detroit City Charter Commissioner Ken Coleman, pushed for the yes vote.
"I believe this agreement is a good one," he said. "I am a lifelong Detroiter. I've got skin in the game."
Under the water deal, the city would lease infrastructure to suburban communities in exchange for a 40-year, $50 million annual fee and an annual $4.5 million payment assistance fund.
Among her concerns, Sheffield questioned the deal's legality and noted that the city will have to contribute $20 million of the annual investment.
Council member Saunteel Jenkins said she didn't think the plan was deceptive, just complex. She agreed that the $50 million is an important piece of the arrangement.
"But the reality is, that $50 million dollars that will now be dedicated solely to the infrastructure in the city of Detroit will make a difference," she said.
The annual fee can only be used for Detroit water-related repairs, maintenance and improvements. The money would come from revenue generated by the existing water rates for Detroiters, as well as suburban users. Officials have said rate increases will be capped at 4 percent over the next 10 years.
To move forward, the plan requires approval by the council and at least one of the counties of Wayne, Oakland or Macomb. The deadline for county officials to vote is Oct. 10.
Jones first said on Wednesday that she could not support the authority. A lease of Detroit's water system, she contends, creates a new "franchise" that requires a public vote.
Detroit Corporation Counsel Melvin Butch Hollowell addressed the council prior to the vote, clarifying that the agreement would not create a franchise or violate the city's charter.
Jones issued a statement Friday that detailed lingering concerns over the prospect of water rates climbing beyond 4 percent, funding sources to repay capital bonds and ensuring Detroiters get a fair portion of the water affordability funding and denying the people a right to vote on the move.
"I cannot, in good conscience, disregard the will of voters, even though there may be an overwhelming need to act," Jones wrote. "How we achieve a solution, to me, is just as important as the solution that is achieved."
Syncora settlement approved
Separately on Friday, the council approved a key agreement outlined in the city's debt-cutting bankruptcy plan to shed $7 billion in debt.
The agreement with Syncora, finalized during marathon mediation sessions over last weekend, provides the bond insurer with a recovery of nearly 14 cents on the dollar for financing it supplied for a troubled pension debt.
It also calls for the investment and development of Detroit assets facilitated through the transfer of city land, extension of the Detroit-Windsor Tunnel lease to a Syncora subsidiary and a 30-year lease of a parking garage below Grand Circus Park.
Syncora will get $6.25 million in settlement credits to be used on eligible properties including Joe Louis Arena, parking assets and real property located within three miles of the tunnel.
In exchange, the creditor will withdraw objections and appeals tied to the city's plan to shed $7 billion in debt.
Land bank transfer denied
As a third issue, the council unanimously rejected the transfer of 45,000 vacant city-owned residential lots to the DLBA and said it plans to put forward an alternative.
Jenkins called the plan, as presented, "a huge overreach" and that it goes against the spirit of Public Act 436.
She added the plan, to convey land in perpetuity away from the city and to the authority without legislative oversight sets a "horrible precedent" and ties the panel's hands on residential land issues in future years.
"The land bank is a new entity," she said. "We still don't know if a land bank in the city of Detroit is the best policy moving forward."
Under the state's emergency manager law, the council now has seven days to submit its alternative that would provide the city with the same or greater benefit. The state's Emergency Loan Board would decide between the two plans.
Orr's spokesman Bill Nowling, in a statement Friday, said giving the land bank authority over future tax-forfeited properties is the "best way to address and mitigate blight in the city."
"It streamlines a cumbersome process and makes it easier for local residents to acquire, clean-up and develop these abandoned properties," Nowling said. "Absent a viable alternative to address systemic blight in the city, it is the best option and a crucial component of Detroit's plan to restructure and improve essential services to its residents."
Jones called the process "insulting." Others, including members Mary Sheffield and Raquel Castaneda-Lopez, agreed they couldn't support the transfer plan as written.
Castaneda-Lopez noted the land bank "does not have the capacity to manage and maintain this level of property."
The councilwoman is heading up the preparation of a counter plan. It's expected to be discussed at Tuesday's meeting.
Craig Fahle, director of communications for the DLBA, wrote in an email after the vote Friday: "We are prepared to receive the properties if and when we get them."