First payment made toward Detroit’s ‘grand bargain’
Detroit — The first “grand bargain” payment — $23.3 million dollars — was sent to two retirement systems this week as part of the city’s exit from bankruptcy.
The Foundation for Detroit’s Future, a nonprofit created specifically to transfer funds from 12 foundations and the Detroit Institute of Arts, made the payment on Wednesday, marking the first of 20 installments to the city as part of a deal to shore up city pensions.
The transfer includes the first contributions made by the foundation funders group of $18.3 million, and the first payment of $5 million made by the Detroit Institute of Arts.
“Today, we are pleased to make the first of many payments to support Detroit’s retired public servants, whose work and sacrifice — today and for decades — have built Detroit,” said Mariam C. Noland, president of the Foundation for Detroit’s Future and the Community Foundation for Southeast Michigan.
“This is an important day. For the Foundation for Detroit’s Future, this is the beginning of a long-term commitment to the city, its retirees and all its residents.”
The Foundation for Detroit’s Future was created to collect $366 million committed by the private foundations and $100 million committed by the DIA for the grand bargain and disperse the money into the General Retirement System and the Police and Fire Retirement Systems.
Aimed at softening pension cuts and preserving the Detroit Institute of Arts collection from creditors, the bargain was a key piece of the city’s plan to end the biggest municipal bankruptcy in U.S. history.
Under the terms of the city’s bankruptcy filing, a package of $816 million has been committed by the foundations, the state of Michigan and the Detroit Institute Arts for the grand bargain.
While the state and DIA will handle their own payments to the city, the foundations created a new “supporting” organization to manage theirs.
Bruce Babiarz, spokesman for the PFRS Board of Trustees, said he welcomes payments from the foundations, the DIA and the state of Michigan as part of the plan of adjustment settlement and cooperative arrangement known as the grand bargain.
“The Retirement System looks forward to receiving these funds to invest under the direction of the newly appointed Investment Committee and the Board of Trustees, subject to state statute,” he said.
Babiarz said while the Police and Fire Retirement System never advocated the sale of art from the DIA, “we are grateful for the public-private efforts to provide supplemental payments to the pension system to help compensate for the funds the city could not pay to the pension system prior to and during the bankruptcy process.”
The pension fund is 88.9 percent funded, has a market value of approximately $3.1 billion and serves about 12,000 active and retired first responders and their families.
The Foundation for Detroit’s Future, which is governed by a five-member board of directors, also is tasked with monitoring the city’s compliance with ongoing grant conditions, including pension fund oversight and providing status reports to the contributing foundations.
The foundations and their committed contributions to the deal are: The Ford Foundation, $125 million; The Kresge Foundation, $100 million; W.K. Kellogg Foundation, $40 million; John S. and James L. Knight Foundation, $30 million; William Davidson Foundation, $25 million, and Community Foundation for Southeast Michigan, $10 million.
Several additional foundations have also agreed to make contributions to the grand bargain.
They include the Fred A. and Barbara M. Erb Family Foundation, the Max M. and Marjorie S. Fisher Foundation, Hudson-Webber Foundation, McGregor Fund, Charles Stewart Mott Foundation, and the A. Paul and Carol C. Schaap Foundation.