Michigan House seals the deal

'Grand Bargain' for bankrupt Detroit passes House

By Rod Meloni - Reporter, CFP ®

DETROIT - It's no secret politics is a messy game, but here in Michigan it's a game even when it doesn't have to be.

The "Grand Bargain" that has been painstakingly cobbled together by Judge Gerald Rosen and brings in nearly a billion dollars to Detroit's two pension systems could have been a nice, simple, easy line from point A to point B. There is no disputing its necessity as most pensioners bring home about $20,000 a year and a 30 to 40 percent cut would be economically devastating to most of them, particularly cops and firefighters who did not pay into Social Security, thus they don't receive any.

Foundations and the DIA were onboard to throw money into the pot and so was Gov. Rick Snyder. He offered some $300 million over 20 years to help. But he needed the state legislature to go along with it.

Senate Majority Leader Randy Richardville was onboard right away. House Speaker Jase Bolger wasn't. Right off, he insisted the city's municipal unions put money into the deal before he would even consider bringing the pension assistance bill package to the house floor. He was saying that at the end of last year, and he said it right up until last this week.

His point was the city's unions were anxious to take everything to court; to ball up the works and try with all their might to prevent the bankruptcy plan's ratification. That was the plan before the mediation talks put the unions and the retirees on a path to negotiated deals that could not be appealed. He believes the unions are quite responsible for the city's economic demise and he wanted his pound of flesh; the money they would put into legal bills should go into the grand bargain instead was his demand. This was tweaking the unions to say the least and it was using power that the Speaker can wield should he or she so choose.

Bolger could have, as the unions were coming around and giving up pay and benefits, gone without but he opted in instead. That's how the game is played, bare knuckles at the ready.

There was another nasty part about this game Bolger played. The retiree vote packages for Kevyn Orr's plan of adjustment have gone out. Retirees whose representation struck deals with the court are being asked to vote for the plan of adjustment as part of their deals. But without the state money there was no way to know whether to make that yes vote before sending in the ballot.

Judge Rosen himself said in arguments in the bankruptcy court that any delay in the grand bargain outside the 60 voting period would mean that any yes vote by a pensioner would be considered a no vote because the rules would have changed on them. Bolger stood fast and fanned the flames of fear by threatening to hold off his house vote until after the plan of adjustment voting ended, thus rendering the grand bargain a dead one instead. There was more than a little anxiety experienced by Detroit's employees and pensioners upon hearing how this was playing out.

But something happened along the way. Someone explained the math to Bolger. Posturing may be nice in the political arena, but the state would end up holding a bigger and more expensive bag of garbage if it opted to do nothing. So Bolger went from the slow walk to the fast track. He put his President Pro-Tem John Walsh (R-Livonia) on the case, heading up a committee that would pull together the requisite legislation to bring the house into the deal last week. Lo and behold, earlier this week, just about the time Walsh was starting his hearings, two unions -- the Building and Trades and the UAW -- put out press releases they would put money into the deal [pennies really]. That gave Bolger his political cover and poof. All of a sudden there were 11 bills and they were moved out of committee on a rocket sled and today they passed with near unanimous support.

It didn't have to go this way as the outcome was fairly obvious. But as with everything in Detroit, especially where the state government is concerned, there is a contentious rift. There is not a lot of trust, there is not a lot of respect, yet in the end both sides came to the realization that like it or not Detroit needs Lansing and vice versa. The senate will pass the house bills next week and the governor will sign it and the grand bargain is on its way as is Detroit's plan of adjustment.

But, a word of caution here:

After sitting in most of the federal bankruptcy hearings to date, I can assure you Judge Steven Rhodes is watching and listening intently. He knows his work is precedent-setting and being watched by the nation. He loves what Gerald Rosen is doing. But at the same time he has shown that just because deals are getting cut, you cannot assume all is well in Detroit. Rhodes can, and in fact is obligated by bankruptcy law to, not treat creditors differently. This is why Syncora and FIGIC [the city's municipal bond insurers] are fighting so hard against Kevyn Orr's plan of adjustment. They are likely to 10 to 15 cents on the dollar right now while the pensioners are being made largely whole.

This is a problem that makes the plan of adjustment or even the grand bargain no simple or easy slam dunk. Anything can happen. So while the House made good on the governor's promise and the senate will do so next week, the entire Detroit bankruptcy process is unpredictable and fluid. Things are looking good, but this can just as easily become derailed.

Bankruptcy, like politics, is a messy game, too.

Stay with us at Local 4, we will bring you every twist and turn because a surprise may only be a twist away.

House votes:

HB5566 vote
HB5567 vote
HB5568 vote
HB5569 vote
HB5570 vote
HB5571 vote
HB5572 vote
HB5573 vote
HB5574 vote
HB5575 vote
HB5576 vote

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