Emergency City Manager Kevin Orr is asking the Michigan state government for a serious chunk of change. Kevin Orr is asking the state government for $350 million dollars in funding so that he can strike a grand bargain with unions and debtors in the city of Detroit. Support at the state level, however, is not guaranteed.
Detroit now appears to be on the verge of emerging from the largest city-government bankruptcy in United States history. The city was swamped under debt owed to pension and benefit funds for unionized city employees, and in debts owed to various lenders.
Governor Synder hopeful of Detroit’s progress
With the second day of negotiations coming to a close, it appears that a deal is close to being reached. There has been some resistance from the state legislator over how much unions should contribute in cash or give up in cuts. Indeed, without union concessions, the State House would likely refuse to support state funds being used in the settlement.
It appears now, however, that unions and lawmakers are closing in on a deal, though the terms of the deal remain unknown. The terms of the deal will cover over 3,500 workers. If a deal can be reached, there is hope that the city could exit bankruptcy this fall, marking the end of the country’s biggest city bankruptcy.
Insurance company leading bankruptcy resistance
Despite what you might think, the party fighting hardest against settling the bankruptcy case isn’t pensioners or a large bank with loans out to the city. Instead, a Bermuda-based bonds insuring company, Syncora, has been fighting tooth and nail against a settlement.
Why? The company stands to lose as much as $250 million dollars in the bankruptcy and could, in affect, be pushed into a bankruptcy of its own. Syncora insured payments on a $1.4 billion dollar deal that disgraced former mayor Kwame Kilpatrick. The city is now trying to wipe that debt out.
Meanwhile, Tea-Party group Americans for Prosperity has promised to fight any appropriations. The group is known for its anti-tax stance. The group’s leader, Scott Hagerstorm, emphasized that sending more money to Detroit is “the wrong way to go” and that Michigan has other priorities.
In spite of the resistance, however, most signs point to compromise and the Michigan state government contributing $350 dollars over the next 20 years for a settlement. The funds will come from a $250 million dollar a year tobacco-settlement found.