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As retirees and lawmakers began leveling criticism at Michigan Governor Rick Snyder's plan to use $350 million of state money to reduce cuts in pension benefits for Detroit workers, Snyder set out yesterday to defend the proposal as a way to help ease the impact of the city's bankruptcy on its retired workers, Reuters reported yesterday. The proposal Snyder sketched out on Wednesday would need approval from the Republican-controlled Michigan legislature, where Snyder anticipates challenges from lawmakers who have opposed a "bailout" of the city. Snyder also said he would not release any state funds unless Detroit's unions, workers and retirees agree to halt litigation seeking to challenge Detroit's bankruptcy. Snyder's effort to win support for his plan may face its toughest test from within the ranks of his own party. Republican lawmakers hold a majority in both houses of Michigan's legislature and their leaders joined Snyder when he unveiled his plan on Wednesday. But some lawmakers do not want to see state cash thrown at Detroit's problems. "I don't want to reward a bad actor. It's a bad precedent for the rest of the state," said State Senator Patrick Colbeck, a Republican from Canton, a town west of Detroit. He added that if Detroit gets state money, other Michigan communities should also get a share for their needs.

Bankruptcy Judge Steven Rhodes denied a request from Detroit's creditors to have an official say in valuing the city's art collection and said that he will announce his decision next Tuesday on a request from Detroit retirees to block cuts to their health care, Reuters reported today. Judge Rhodes said he did not have the legal authority to approve the creation of the creditors' committee that would have examined the works of the Detroit Institute of Arts. Judge Rhodes implored the city and its creditors to do their best to negotiate settlements before that deadline.

Michigan would pay $350 million over 20 years to reduce bankrupt Detroit’s pension liabilities under a deal struck by Governor Rick Snyder and lawmakers, Bloomberg News reported today. The money would be in addition to $330 million that nine foundations pledged through bankruptcy court mediation to reduce city pension cuts and to shield Detroit’s art collection from a sale to pay $11.5 billion in unsecured debt. The money should be linked to a broader settlement that would protect the masterworks, Snyder said yesterday. Snyder also called for independent management of Detroit’s retirement system, which is run by two appointed boards. He declined to say how that might occur, though he said it wouldn’t necessarily be through state control.

Detroit's available cash shrank less quickly than city officials feared it would in the latest quarter, but it was still down nearly 32 percent from the previous quarter to $87.5 million, according to a report posted on the city emergency manager's website, Reuters reported yesterday. The decline was significant, but did not approach the levels feared by Detroit Emergency Manager Kevyn Orr. In August, he warned that the city could be out of cash at year end if Detroit were unable to gain unfettered access to casino tax revenue, which is pledged to banks for payments on interest rate swap agreements that the city is trying to terminate at a steep discount. Bankruptcy Judge Steven Rhodes, who is overseeing Detroit's bankruptcy case, last week rejected a deal for the city to end the swaps at a 43 percent discounted payment to two investment banks. Judge Rhodes urged Detroit to renegotiate with its swaps counterparties, UBS AG and Merrill Lynch Capital Services. Detroit's cash on hand beat the city's forecast of ending the quarter with just $40.7 million, largely due to higher-than-expected property tax collections, the report showed.

Gov. Rick Snyder (R) avoided asking the public what he had already floated privately with lawmakers: State aid to help Detroit emerge from bankruptcy, the Associated Press reported on Saturday. Snyder appears to have some allies in the leadership of the Republican-led legislature, but other legislators are worried about state financial assistance to Detroit setting a precedent if other cities collapse. Snyder is gauging support for a state commitment of roughly $350 million over 20 years, matching $330-plus million in commitments to date from national and local foundations to shore up Detroit's pension plans and prevent the sale of valuable city-owned art. Other foundations are expected to soon announce their participation in the effort to help address two of the bigger issues facing the insolvent city. Senate Majority Leader Randy Richardville, who last year introduced a bill to prohibit the sale of the Detroit Institute of Arts' collection to help with Detroit's financial crisis, said he had seen no plan or request, and other lawmakers said Snyder spoke more of a concept and did not offer much in the way of specifics. But Richardville was cautiously optimistic that a solution would be put forth soon and said legislators understand the city's importance to Michigan.

The Detroit federal judge overseeing mediation of the city’s $18 billion bankruptcy met with Michigan’s top two Republican lawmakers to gauge their willingness to help resolve the largest municipal insolvency in U.S. history, Bloomberg News reported today. The leaders of the state legislature met with U.S. District Judge Gerald Rosen in December, their representatives said this week. The bankruptcy is politically sensitive in Michigan’s Republican-controlled House and Senate, where lawmakers have proposed using a $971 million surplus to cut taxes. Talks with lawmakers are continuing, a person familiar with the matter said. Any aid from the state legislature would mark a change in the Republican party’s treatment of the heavily Democratic city, Michigan’s largest. Republican Governor Rick Snyder, who faced lawsuits for authorizing the bankruptcy, has said he opposes a state bailout that only focuses on debt.

The multimillion-dollar plan to save the Detroit Institute of Arts from a fire sale to help the city pay its debts in bankruptcy court could face its first test next week when a group of creditors will argue in court that the valuation of the city-owned art collection is incomplete, the Wall Street Journal reported today. Christie's auction house last month estimated that a portion of the museum’s collection — the more than 2,700 pieces of art purchased with city funds at the DIA — is worth between $454 million and $867 million. But the creditors group says that the valuation process should be much broader to include more works from the 66,000-piece collection, likely resulting in a total valuation of more than $1 billion. If the collection is deemed to be worth substantially more than the Christie's estimate, it could threaten the plan to raise some $500 million from foundations to pay the city for the entire art collection so that the city can fund a portion of its estimated $3.5 billion pension shortfall.

Bankruptcy Judge Steven Rhodes said that he will rule on Thursday on whether to let stand a deal struck between the city of Detroit and two investment banks to end toxic interest rate swap agreements that proved to be a strain on city finances, Reuters reported yesterday. Lawyers for bond insurers, banks, pension funds and others objected to the deal during a bankruptcy court hearing yesterday, saying that the Dec. 24 deal with UBS AG and Merrill Lynch Capital Services, a unit of Bank of America Corp., was not in the best interest of the city. Detroit could have won larger concessions from the investment banks, the opponents argued. If Judge Rhodes approves the agreements, Detroit will pay the banks $165 million plus fees to end the agreements at a 43 percent discount to their original cost to the city. Detroit entered into the interest-rate swaps in a failed attempt to hedge, or limit the risk, on some of the $1.4 billion in pension debt that it sold in 2005 and 2006.

Federal mediators involved in the Detroit’s bankruptcy proceedings announced yesterday that national and local philanthropic foundations have committed more than $300 million toward a deal that would help preserve the Detroit Institute of Art’s renowned collection by bolstering the city’s employee pension funds, the New York Times reported today. A group including the Ford Foundation, the Kresge Foundation and the John S. and James L. Knight Foundation have pledged to pool the money, which could essentially relieve the city-owned museum of its responsibility — estimated at millions of dollars — to help Detroit pay its debts in its federal bankruptcy case. As part of the plan, on which negotiators have been working quietly for months, the museum might be removed from city ownership and put under the control of the state. But mediators stopped short of saying that an agreement had been reached with state officials or with the office of Kevyn D. Orr, Detroit’s emergency manager, who had said that the museum must pay its share to help ease the city’s debt.

Retired Detroit workers, including police and firefighters who are seeking to block the bankrupt city from unilaterally cutting their health care benefits, filed suit against the city, which is already struggling to provide its 700,000 residents with basic services, Bloomberg News reported on Friday. The retirees said that the city’s decision to reduce funding of vested health-care benefits by 83 percent, starting in March, will force retirees to spend money out of pocket to replace the coverage, according to a filing on Thursday by representatives of the workers in bankruptcy court in Detroit. The retirees seek to block the city from dropping its state and federal “contractual obligation” to provide them with health care benefits, according to the filing.