Governor backs plan to give bankrupt Detroit $350M

Published on NewsOK Modified: January 22, 2014 at 8:18 pm •  Published: January 22, 2014

LANSING, Mich. (AP) — Michigan Gov. Rick Snyder is pledging to commit up to $350 million in state funds to help Detroit as the bankrupt city tries to shore up pension funds that are billions in debt and prevent valuable city-owned art from being sold.

The Republican joined legislative leaders on Wednesday to announce a proposal that would provide the money over 20 years, as long as a larger settlement is reached with labor unions and city workers concerned about pensions. The lawmakers acknowledged the plan may be a hard sell in the GOP-controlled Legislature, but they said it was better than a protracted legal fight in a city facing an estimated $18 billion in debt.

The governor was quick to say the money would not be a bailout, but rather a way to help Detroit quickly settle its bankruptcy and allow it to grow. He also noted the plan follows roughly $330 million that has been pledged so far by charitable foundations, largely in exchange for protecting works at the Detroit Institute of Arts that might otherwise be sold during bankruptcy.

"If Michigan's to be a great state again, we need Detroit on a positive path to success," Snyder said.

Snyder had initially warned Detroit not to expect any state money when the city filed for bankruptcy, a move he supported. What changed, he said, were mediators "doing good work" to bring the foundations and state together to help.

He noted that the money would either be diverted from tobacco settlement funds that Michigan receives each year or come from securitizing future payments to get a lump sum up front.

Snyder said the state aid would help minimize cuts to city retirees' pensions, particularly those with low incomes, but he declined to detail the impact for all 21,000 current retirees. He said details would come when the city's state-appointed emergency manager, Kevyn Orr, filed his plan to take Detroit out of bankruptcy with the courts. That filing is due by March 1.

Before Wednesday, the governor had been largely mum about any potential state aid, partly because discussions between the city and its creditors with federal mediators are confidential.

Snyder had privately gauged support among lawmakers last week for the plan — and he is facing politically tricky terrain.

Some legislators are worried that state financial assistance to Detroit could set a precedent if other cities collapse, while others have said they have their own spending priorities elsewhere in the state. Election-year politicking also could come into play, as some GOP lawmakers blame many of the city's more recent problems on a corrupt political culture in Detroit, where Democrats rein.

In Snyder's corner, however, are top Republican and Democratic leaders who agree it would be better to help resolve the bankruptcy now.

Republican Senate Majority Leader Randy Richardville, who is from Monroe in the southeast corner of Michigan, said the proposal was "very positive, and in general is being received that way."

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