%1

A rift over an executive's pay raise is risking an annual infusion of $18 million for the city's retirement system, an attorney for the oversight board of a city pension fund says, the Detroit News reported. Sean P. Gallagher, special counsel for the investment committee over Detroit's Police and Fire Retirement System, argued in a confidential memorandum that pension trustees' refusal to sign off on a pay boost for the system's deputy investment officer could amount to "potential defaults" in the terms of the so-called "grand bargain" funding commitment crafted in the city's bankruptcy to pump up its pension system. The retirement system's failure to adjust the pay rate of deputy investment officer Kevin Kenneally could amount to a lack of compliance with the "grand bargain," making it impossible for the investment committee or its chair to execute year-end certifications required for the annual funding, the memo notes. The funding comes from the nonprofit Foundation for Detroit's Future, which was created under the "grand bargain" to transfer funding from a dozen private foundations to shore up city pensions. The claim doesn't sit well with some pension board members, who argue the oversight board is using the threat as leverage after trustees deemed the investment committee's proposed 38 percent pay bump "grossly excessive" and declined to act on it.

Detroit moved one step closer to seeing its bond rating emerge from junk, in a sign of its recovery more than five years after becoming the biggest U.S. city ever to go bankrupt, Bloomberg News reported. S&P Global Ratings yesterday raised its ranking of the city one notch to BB-, three steps below investment grade, because the government’s finances have been on the mend since coming out of bankruptcy in late 2014. The company said that the change reflects Detroit’s ability to cover rising pension and debt costs in the years ahead without running budget shortfalls, a benefit of the court proceedings that allowed it to cut obligations it couldn’t afford after decades of population and economic decline.

Detroit could have been on the hook for millions of dollars in a lawsuit alleging police abuse. Lawyers, however, are closing the case after eight years, acknowledging that the claims of possibly 200,000 people are practically worthless due to Detroit’s 2013 bankruptcy, the Associated Press reported. The 2010 lawsuit, which described poor conditions in holding cells and excessive detentions, was in progress when Detroit became the largest U.S. city to seek protection from creditors. The city eventually emerged with a clean balance sheet, a robust downtown and a national buzz among millennials. But a new, flush Detroit doesn’t mean a windfall for people who won the class-action case. Instead, they would need to get in line like other creditors because the lawsuit was pending during the bankruptcy. Attorneys worked on a settlement with the city but concluded it wasn’t practical: A $1,000 recovery per person could be worth as little as $40 — and paid over many years.

Detroit is protected from an exonerated youth’s wrongful prosecution suit because of the city’s 2013 bankruptcy, approved in late 2014, a federal judge has ruled, the ABA Journal reported. U.S. District Judge David Lawson ruled on Tuesday that Davontae Sanford couldn’t recover from the city of Detroit, even though his murder conviction wasn’t vacated until July 2016. Sanford had been arguing actual innocence since at least 2008, making his claim “in fair contemplation” before the city declared bankruptcy, Judge Lawson said. Courthouse News Service covered the decision. Judge Lawson ruled that Sanford can still sue two police officers, however. Sanford also received $408,000 from the state of Michigan in a compensation program for wrongfully convicted people.

A Treasury market rally, low supply and strong demand for high-yielding securities greeted Detroit when it sold $135 million of debt yesterday, the first sale of bonds backed only by the city’s promise to repay since it filed a record-setting bankruptcy five years ago, Bloomberg reported. The conditions allowed Detroit to secure lower interest rates than initially expected, leaving it paying even less than some borrowers that haven’t reneged on their debts. Bonds were priced with yields ranging from 3.36 percent on a 2020 maturity to 4.95 on those due in 2038 - tighter than what was first offered. The city also was able to increase the size of the deal from $111 million to $135 million, an indication of strong demand.

Detroit is eyeing savings from a just-launched redemption offer for bonds it issued in 2014 as part of the city’s exit that year from its historic bankruptcy, municipal officials said on Tuesday, Reuters reported. The city is targeting $131 million of its nearly $632 million of series 2014B financial recovery bonds that mature in 2044 with a tender offer that expires Dec. 3. The move follows the redemption of $70 million series 2014C bonds earlier this year. The tender offer’s selling range is between $85 and $89 per $100 of the bonds’ par amount, according to city documents. Detroit issued the bonds as part of its federal court-approved plan to exit what was then the biggest U.S. municipal bankruptcy, which allowed the city to shed about $7 billion of its $18 billion of debt and obligations. Debt proceeds were used to fund settlements with bond insurers, interest-rate swap providers, city pension funds, as well as to raise money for capital projects.