04.29.14

One More Lap.  According to U.S. Chief Judge Gerald Rosen’s mediation team, Detroit has reached a new five-year agreement with 14 of its unions, including AFSCME — the city’s largest union — in an agreement that covers 3,500 of the Motor City’s approximately 10,000 current workers: “The (collective bargaining agreement) terms between the city and the coalition unions are fair and balanced…They provide security for union workers and, at the same time, provide an economically feasible agreement for the city as it emerges from bankruptcy.” Nevertheless, the agreements must be approved by members and also must be approved by U.S. Bankruptcy Judge Steven Rhodes. The tentative deals — reached with assistance from a mediation team led by Chief U.S. District Court Judge Gerald Rosen — must be approved by members of the unions and by Rhodes as part of the city’s Chapter 9 case. The contract agreement is subject to ratification by 3,500 municipal employees in 17 locals under the umbrella of the American Federation of State, County and Municipal Employees union and 13 other civilian unions.

Details of the new contracts were not released Monday morning but will be included in the city’s debt-cutting reorganization plan, according to bankruptcy mediators. “They provide security for union workers and, at the same time, provide an economically feasible agreement for the city as it emerges from bankruptcy,” federal mediators said the statement. Judge Rosen’s office noted: “The settlement was reached after intensive negotiating sessions over the past several months in which the parties’ interests were fully and vigorously represented by counsel and all issues robustly negotiated,” the mediators said. “The mediators particularly acknowledge the very productive and constructive role that AFSCME Council 25 and its International played in the success of the negotiations.” Judge Rhodes, who had been expected to consider final approval of the city’s disclosure statement, delayed to allow the city to update its plan to incorporate latest settlements and finalize voting procedures. If the Motor City’s disclosure statement is approved by the federal court, that would clear the path for the city’s more than 170,000 creditors to begin voting as early as next month. The mediators did not release details of the plan, though local reports said it featured “significant” wage restoration for union members who had their salaries cut in 2010 and 2012. The coalition includes AFSCME, the city’s largest union and previously one of its toughest court challengers. The action yesterday followed last Friday’s agreement with a court-appointed committee of retirees over retiree health care benefits, mostly with regard to the Motor City’s post-retirement health care benefits or OPEBs, which are considered among the least secure of Detroit’s estimated $18 billion of debt. The agreement calls for the retirees to recover only 10% to 13% of their retiree health care benefits, according to the latest disclosure statement. The city will increase to $450 million from less than $300 million the amount it puts into a health benefits account, and has also agreed to cap to 20% the amount of annuity money it will try to claw back from retirees who may have been overpaid by the retirement systems.

 

Contract talks with police and firefighter unions remain ongoing in confidential mediation sessions, with Mark Diaz, president of the Detroit Police Officers Association, telling the Detroit News: “We’re still open to discussions, but at this point, we do not have an agreement…We recognize public safety is without a doubt the most important consideration within the city of Detroit. We’re not going to come to an agreement if the city isn’t taking that serious.”The public safety labor coalition also includes the Detroit Fire Fighters Association, the Detroit Police Command Officers Association, and the Detroit Police Lieutenants and Sergeants Association. According to the proposed contract terms so far have been unacceptable; he advises the Motor City has been offering police officers wages starting at $14 an hour.

Wolverine Politics. At yesterday’s hearings, Judge Rhodes advised Detroit’s attorneys that notwithstanding the current uncertainty with regard to whether the legislature in Lansing will act favorably on Governor Rick Snyder’s bipartisan, and unprecedented so-called $816 million DIA-appropriations package, they need to create a clear way for retirees to vote in support of the city’s bankruptcy exit plan should the legislature act before its session ends in June — and for their votes to count against the plan should the legislators fail to act. The issue has been complicated recently after the demand by Michigan House Speaker Jase Bolger that unions must contribute cash to the so-called “grand bargain” for the city of Detroit before the Legislature will act on Gov. Snyder’s funding request. Nevertheless, Speaker Bolger yesterday congratulated the city and the unions and called the agreements a “good sign,” even as he repeated his demand for unions to contribute money towards the deal: “I hope the unions will join the state’s taxpayers in putting money that would otherwise go to legal bills into protecting their retirees.” (Last week, Michigan Senate Majority Leader Randy Richardville (R-Monroe) and Gov. Snyder made clear they opposed any demand for a cash contribution from unions as a condition for support.)

The Fate & Fine Art of Municipal Bankruptcy. In a related development at yesterday’s hearing, Judge Rhodes approved a motion by bond insurer Syncora which will direct that documents shared between Michigan Attorney General Bill Schuette’s office and the Detroit Institute of Art be provided to Syncora. In the months leading up to the AG’s legal opinion last June, Mr. Schuette had opined that the DIA’s art cannot be sold, because the artwork is held in trust for the people of Michigan and cannot be sold or otherwise use to satisfy the city’s debts. Yesterday, however, in another federalism precedent, Judge Rhodes questioned the weight of Attorney General Schuette’s opinion with regard to whether it has any standing in a federal court. Judge Rhodes determined that documents Syncora wants to review are not subject to privilege, because they were shared between the Michigan Attorney General’s office and the DIA before Mr. Schuette’s public opinion on the DIA issue created a legal common interest that could shield the documents from disclosure. Syncora and Financial Guaranty Insurance Co. are seeking to force the Motor City to consider bids on selling or privatizing the Institute in order to boost creditor recoveries, with Syncora’s attorney telling the court: “The art has been a sort of noteworthy, highly publicized part of the case and from our standpoint a very important part of the case…The city is proposing to address the issues surrounding the art collection in a way, from our standpoint, that yields far less value.”

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