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The board of one of Detroit's two pension funds agreed yesterday to urge its members to vote in favor of the city's plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history, Reuters reported yesterday. Detroit's General Retirement System (GRS) said that it will mail a letter early next week to current workers, retirees and other beneficiaries recommending a favorable vote and outlining the rationale for that recommendation. "The board of trustees believes that the proposed (plan of adjustment) represents the best interests of GRS members, retirees and beneficiaries and further represents the best and most prudent option for maximizing the preservation of retirement benefits," the board said in a statement. In May, the city mailed ballots to about 20,200 members of the system soliciting a vote on the plan by a July 11 deadline set by a U.S. Bankruptcy Court judge. About 3,200 of those ballots contained erroneous information and had to be resent.

Michigan Attorney General Bill Schuette yesterday asked a bankruptcy judge to block a subpoena that would force him to testify about why he wrote an opinion asserting that the Detroit Institute of Arts property cannot be sold in the city’s bankruptcy, the Detroit Free Press reported today. Bond insurer Syncora, which has aggressively fought Detroit’s bankruptcy, wants Schuette to deliver additional documents showing internal communications about the DIA opinion and testify at a deposition. The testimony and records would serve as fodder for Detroit’s bankruptcy plan confirmation trial — a massive hearing set to begin Aug. 14 that will determine the fate of the city’s restructuring plan. Schuette already turned over some documents showing his communication with DIA attorneys, but Syncora wants more. Bankruptcy Judge Steven Rhodes will determine whether the attorney general must testify and turn over records.

The federal judge overseeing Detroit's bankruptcy delayed, by three weeks, the start of a hearing to confirm the city's debt adjustment plan, raising the possibility that the case could drag on beyond the term of Detroit's emergency manager, Reuters reported yesterday. Bankruptcy Judge Steven Rhodes yesterday released the case's fifth revised schedule, pushing back the start of the hearing until Aug. 14 from July 24. The schedule listed as many as 28 hearing days that could stretch until Sept. 23. That means the bankruptcy case the city filed in July 2013 could drag on beyond Kevyn Orr’s 18-month term as the city's state-appointed emergency manager. Under Michigan law, Detroit's elected officials could opt to remove Orr in late September. Orr has indicated he expects to leave the job at that time.

Detroit's three automakers said yesterday that they had committed $26 million toward $100 million pledged by the city's art museum to save its collection from being tapped to raise cash for Detroit's historic bankruptcy, Reuters reported yesterday. Under the grand bargain, the Detroit Institute of Arts (DIA) would contribute $100 million to ease pension cuts on the city's retirees and avoid a sale of art works to pay city creditors. Philanthropic foundations have pledged about $366 million and the state of Michigan would make a lump sum payment of $195 million. The $26 million from the automakers consists of $10 million from Ford Motor Company Fund, $5 million from General Motors Co, $5 million from General Motors Foundation and $6 million from Chrysler Group LLC. As part of the grand bargain, ownership of the DIA's collection and assets would be transferred from the city to the private nonprofit corporation that currently operates the museum. The Detroit City Council on Thursday unanimously voted to support the transfer.

The Detroit City Council unanimously approved a fiscal 2015 budget yesterday amid warnings that the spending plan could change as the city winds it way out of U.S. Bankruptcy Court, Reuters reported yesterday. Kevyn Orr, Detroit's state-appointed emergency manager, crafted the budget, which is part of a three-year spending plan he based on assumptions in the city's proposed debt adjustment plan and revenue estimates agreed to by city officials in February. "This budget is very fluid," said Irvin Corley, the council's fiscal analyst, noting that changes in the plan would lead to budget amendments. Detroit's latest version of its plan to adjust $18 billion of debt and other obligations and exit the biggest municipal bankruptcy in U.S. history is pending before a U.S. Bankruptcy Court judge, who has set a July 24 start date for a trial on its fairness and feasibility.

Bankruptcy Judge Christopher Klein set another hearing for Stockton, Calif.’s chapter 9 case for July 8, in order to get more clarity on collateral at stake, BondBuyer.com reported yesterday. While many expected the case to wrap up this week, Wednesday's proceedings focused mainly on Franklin Advisors, Inc., the only creditor with which Stockton has not reached an agreement. Under the reorganization plan, the city plans to repay the investment firm $350,000 for a $35 million loan, which amounts to less than a penny on the dollar. Franklin's attorney, James Johnston of Jones Day, told the judge he should not confirm the plan because it does not pass the series of hurdles that he had said it must pass in order to exit bankruptcy.

In the final day of a trial to determine if Stockton, California, is ready to end its two-year journey through chapter 9 protection, the city argued that its plan to handle its liabilities to creditors, public workers and the state's pension fund was fair and equitable, Reuters reported yesterday. The trial's proceedings yesterday, plus the four days of hearings in May, mainly focused on the Northern California city's holdout creditor — two funds managed by Franklin Templeton Investments — which the city has proposed offering less than a penny on the dollar. But the $3.7 trillion municipal bond market is closely watching this trial for an additional reason: to see how the court handles the treatment of pension obligations, which the city has proposed leaving untouched. Last month, U.S. Bankruptcy Court Judge Christopher Klein said that he would venture into largely untrodden territory to determine whether the country's largest pension fund, the California Public Employees' Retirement System (CalPERS), could be forced to take a loss as other creditors do in municipal bankruptcies. The city, its retirees and CalPERS yesterday presented a united front in urging the judge to leave pension obligations alone in his ruling.

The Michigan Senate yesterday passed a package of bills that includes state money to aid Detroit retirees, a key element in the city's plan to adjust its debt and exit the biggest municipal bankruptcy in U.S. history, Reuters reported yesterday. The action by the Republican-controlled Senate sends the nine bills to Governor Rick Snyder, who has pushed lawmakers for state money for Michigan's biggest city. The measures won approval from the Republican-controlled House of Representatives on May 22. Under the so-called grand bargain in Detroit's debt adjustment plan, Michigan's nearly $195 million lump sum contribution, along with $466 million pledged over 20 years by philanthropic foundations and the Detroit Institute of Arts, would be used to ease pension cuts for city retirees. The deal would also protect city art works from being sold to raise money to pay city creditors and includes commitments from two unions to raise money for retiree health care costs.

Detroit's emergency manager warned on Friday that a complex package of nearly $1 billion in possible aid for the bankrupt city could unravel unless city employees and retirees approve a pension deal, the Associated Press reported on Friday. Kevyn Orr said that $195 million in upfront state money still has to be approved by state senators — possibly next week — and he worries city workers and retirees voting on a related deal to cut their pensions by up to 4.5 percent will make a "protest vote" or be influenced by creditors such as bond insurers trying to undermine the agreement with "misinformation." The state funds, the equivalent of $350 million spread over 20 years, would be joined with $466 million in commitments from 12 foundations and the Detroit Institute of Arts to shore up the city's two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit. Roughly 30,000 retirees and city employees are in the midst of a two-month–long vote on the pension and art deal.

Early ballots from Detroit city employees and its retired workers are strongly supporting Detroit's debt-cutting plan, giving new hope to city leaders who aim to exit bankruptcy court by this fall, the Wall Street Journal reported yesterday. The city of Detroit sent ballots to roughly 32,000 pension recipients, offering them a stark choice: Vote for the plan to cut most pensions and eliminate a future cost-of-living increase, or reject the plan and risk additional cuts. The initial tally from votes of roughly 5,000 current and former city workers with pensions mailed in so far is favoring the city's plan at a more than two-to-one margin, city officials said. Support from pension-holders is seen as being key to the success of Detroit's plan. A coalition of philanthropic foundations, private donors and state leaders have pledged $816 million to help make up a shortfall in the city's pension plans to protect the city-owned art collection at the Detroit Institute of Arts (DIA) from the auction block, but they'll only release the funds if a majority of pension-holders vote for the city's debt-slashing plan. A city-commissioned appraisal last year for some of the most valuable city-owned artwork pegged its value at up to $866 million. Some retirees and other creditors, however, have raised questions in bankruptcy court about whether the city lowballed the value of its city-owned DIA collection.