Traverse City Record-Eagle


May 9, 2014

Bills propose $195 million payment to Detroit

LANSING, Mich. (AP) — State lawmakers introduced legislation late Thursday that would divert nearly $195 million from Michigan's rainy day savings account to help shore up bankrupt Detroit's pension funds and prevent the sale of valuable city-owned art.

Rep. John Walsh, R-Livonia, said the upfront aid — meant to match contributions from private foundations and the Detroit Institute of Arts — would be covered with annual $17.5 million withdrawals from the state's tobacco settlement over 20 years. That would save about $40 million in financing costs, said Walsh, who will lead legislative hearings on the pending 11-bill package starting Tuesday.

The legislation would create a seven-member committee to review Detroit's budgeting, spending and large contracts for 20 years — keeping the state involved once the city is no longer control by a state-appointed emergency manager. The panel would have appointees of the governor, state treasurer, legislative leaders and the Detroit mayor.

Legislators also proposed switching newly hired Detroit employees to 401(k) plans after recently negotiated five-year contracts expire. Another bill would prohibit the DIA from seeking a renewal of its tax millage when it expires in eight years.

"We seriously do not wish to be in the day-to-day operations of the city," Walsh said. "But we do want to assure the taxpayers that we're keeping an eye on the money that we put in there and trying to make sure that the city does not fall back into trouble."

The bills also would provide for a separate investment committee to oversee Detroit pension funds, which Walsh said is consistent with emergency manager Kevyn Orr's proposed restructuring plan.

The intent is to pattern the oversight after the long-term oversight of New York City after its financial crisis in the 1970s.

"If there (are) periods of time of fiscal health and reporting and compliance, the committee could go dormant. When the reporting shows there's a problem again, the committee could reactivate," Walsh said.

He said he probably will hold two to four committee hearings on the bills.

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