ESCANABA - Michigan's $195 million settlement package to help bail out Detroit from its bankruptcy is the best cost-effective option for all state taxpayers, said a local legislator.
That was the message House Rep. Ed McBroom presented to Escanaba City Council during its regular meeting Thursday. He supported the legislation.
"I'm very confident that I made the right decision," McBroom told council as he explained why the $195 million to Detroit was a better option than the whole state paying for Detroit's bankruptcy.
The "Grand Bargain" bill, granting Detroit $195 million in state appropriations, has passed in the House and Senate. Gov. Rick Snyder is expected to sign the legislation into law next week, said McBroom.
Once signed into law, the funds will be taken from the state's Budget Stabilization Fund to be distributed to the retirement systems of the city of Detroit for the 2013-14 fiscal year.
McBroom explained that 80 percent of the state's tax revenue comes from southwest Michigan, including Detroit, so the state appropriation is important to keep up the state's economy.
Detroit will not just be handed the money, added the state representative. Detroit will have to work for the funds by meeting progress criteria such as restructured pension boards.
"This will be a change for the future," he said, saying a state committee will oversee Detroit's progress and will hold back funding until the work is done.
McBroom explained another reason he voted for the Detroit settlement package was because it would have cost taxpayers much more to settle the bankruptcy.
"This is saving the state and local communities a lot of money," he told council. "I feel confident we're saving money by this."
Without the $195 million, taxpayers state-wide would have to pay a higher rate of debt millage, pay more for bankruptcy attorneys, and also pay more for lawsuits against the state, he said.
By the state participating in the settlement, all parties will agree lawsuits cannot be pursued, he said.
If the $195 million bailout did not go through and lawsuits took place, McBroom said the state would be held liable for the employees' pensions. If the state ended up putting these people on public assistance, the cost over 20 years could be $300 million, he said.
McBroom also noted that much of the state's $195 million will come from the tobacco settlement fund.
In addition, charitable donations amounting to $700 million will be given to Detroit if the state participates in the funding, he said.
The city employee unions must also contribute funds to the settlement if it becomes law, he said.
A charitable trust fund which now oversees the city's museum art pieces must also raise funds for the cause, McBroom explained. He noted that most of the city's artwork cannot be sold because of title restrictions - the art cannot be sold but must go back to the owner.
In light of the $195 million in state appropriations, Escanaba City Council passed a resolution on June 5 asking the state to reinstate revenue-sharing funds withheld from all municipalities prior to bailing out Detroit.
Council asked McBroom on Thursday to bring it before state legislators. He replied he would but asked for more specific information on what the city's needs are regarding the resolution.
Council member Ron Beauchamp initiated the local resolution after questioning why Detroit can receive $195 million in state funds to help with employee pensions when other communities are suffering and have had state monies withheld.
Since 2000, Escanaba's general fund has experienced a reduction in state revenue-sharing funds equalling approximately $500,000 a year.
McBroom said U.P. legislators are working hard for the region but cannot always get the support needed to pass legislation. For example, the emergency funding for the U.P.'s extreme cold weather-related expenses this past winter "is not getting anywhere," he said.
Four full-time legislators serve the U.P. along with two legislators who serve the eastern U.P. and part of lower Michigan.
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Jenny Lancour, (906) 786-2021, ext. 143, firstname.lastname@example.org