Story first appeared on FreeP.com.
Michigan's population increased marginally for the second year in a row, a promising trend that experts say may mean fewer people are leaving the state to settle elsewhere.
Michigan saw population declines over a seven-year period between 2005 and 2011 before finally seeing a net gain in 2012. The new U.S. Census Bureau data released today show the state's population rose 0.1% -- 13,103 residents -- between July 1, 2012 and 2013.
During the same time period, the U.S. population increased 0.7%, or just under 2.3 million people. That's the slowest since 1937, according to Brookings Institution demographer William Frey, who called this year's growth "underwhelming."
The Census Bureau projects the nation's population on News Year's Day will be 317,297,938 -- an increase of 2,218,622 from New Year's Day 2013.
Michigan remains the 9th largest state this year, with an estimated 9,895,622 residents. It fell into 9th place in 2012, despite the small population increase, and North Carolina is closing in fast at 9,848,060 people.
If the current trend continues, North Carolina will likely surpass Michigan next year, knocking it into 10th place.
Kurt Metzger, founder of Data Driven Detroit, analyzed the data and attributes Michigan's population increase to a decrease in the net outflow of residents -- that is, the number of people leaving vs. the number of people coming to the state. Today's release did not include information on components of population change such as births, deaths and migration.
"The patterns of residents leaving Michigan for other parts of the country versus those moving into Michigan has always been the component of greatest importance to our population fortunes," Metzger said, noting that the net loss is closely linked to the state's economic outlook. "Michigan has a history of being a net out-migrant state."
In addition, Michigan's labor force -- those ages 16 and older who are working or actively looking for work -- has been shrinking since reaching about 5 million people in 2007, said Jason Palmer, research director at the Bureau of Labor Market Information & Strategic Initiatives.
That also may be changing. According to Palmer, 2013 could mark a turning point for Michigan's labor force -- which in 2012 was 4,657,000. In 2013, the labor force in Michigan averaged about 4.7 million so far.
Paul Tait, executive director of the Southeast Michigan Council of Governments, predicts the population will stay flat in the coming years since Michigan's aging population means fewer births.
"When the economy really tanked, Michigan was hit disproportionately," Tait said. "We still have to keep the push on to diversify our economy."
Nationwide, the south and west regions of the country experienced the greatest population increase in both numeric and percentage figures. North Dakota had the largest percentage increase again this year, with a 3.1% growth -- no doubt fueled by what experts describe as an energy boom in the region.
The largest numerical gains were found among states with a large population base: California (332,643) and Texas (387,397), followed by Florida (232,111), North Carolina (99,696) and Colorado (78,909). Michigan's numerical growth (13,103) was greater than 17 other states, including the District of Columbia. 387,397
Two states -- West Virginia and Maine -- lost population.
Kenneth Johnson, a University of New Hampshire demographer, noted that Florida's population gain is about even with that of the past two years, but "still smaller than that during the 2000s, when Florida gained an average of 282,000 annually." Migration is key to maintaining Florida's population growth, he said, because the difference each year between births and deaths there is small.
A long-awaited milestone also will have to wait another year: Florida was poised to surpass New York for the first time as the third most-populous state -- after California and Texas -- but it didn't happen. New York, which supplies many snowbird retirees to the Sunshine State, still has about 98,000 more residents. But Florida, the figures show, is growing more than three times as quickly.
"It'll probably be next year," Frey predicted.
30 December 2013
BANKRUPTCY DEBT DEAL TO SAVE DETROIT ABOUT $65M
Story first appeared on DetroitNews.com.
Detroit — Emergency Manager Kevyn Orr and lawyers for two banks reached a new $165 million agreement Tuesday for terminating a pension debt deal blamed for plunging Detroit into bankruptcy.
The new agreement saves Detroit an additional $65 million and was announced in court this morning before Chief U.S. District Judge Gerald Rosen, who is the lead mediator in Detroit’s bankruptcy case. The city spent two days trying to reach more favorable terms for ending the pension deal as part of a settlement seen as crucial to Orr's overall plan to shed billions in city debt.
“It's the first, I think it's fair to say, significant agreement in the bankruptcy,” Rosen said today, according to a court transcript. “We understand this has been difficult for everybody and we appreciate it.”
The deal must be finalized by Jan. 31 and approved by U.S. Bankruptcy Judge Steven Rhodes. It was unclear whether bond insurers and others who objected to the original $230 million deal will fight the new agreement.
“We are very pleased and hope that this is a change that Judge Rhodes is happy with,” lead Detroit bankruptcy lawyer David Heiman said Tuesday outside federal court before climbing into a taxi.
Asked if he was happy about reaching the deal early on Christmas Eve, he simply said: “Yes.”
Mediation talks have been private and security guards were stationed outside Rosen’s courtroom Tuesday morning. Rosen ordered the city, banks and bond insurers to meet Monday and on Christmas Eve to negotiate a deal that could free up money for restructuring.
In all, Detroit will save $128 million by terminating the troubled debt deal reached during ex-Mayor Kwame Kilpatrick’s tenure. That represents a 43 percent savings, according to Orr.
The settlement means Detroit won’t have to borrow as much money to pay off two banks, UBS and Bank of America. Instead of borrowing $350 million from London-based Barclays, the city will borrow $288 million.
Detroit will pay $165 million to the banks and spend $120 million on basic city services, including blight removal, updating city information technology and other “quality of life” improvements.
“This is an important development for the city and its residents because it means we can start moving forward on implementing needed investments in public safety and services,” Orr said in a statement Tuesday.
The negotiation sessions were ordered late last week after Rhodes expressed concern about Detroit’s plan to pay two banks up to $230 million to end an interest rate swap arrangement. Rhodes questioned whether the deal was fair to other city creditors.
“Clearly they were sent a message and they listened to what Judge Rhodes had to say – that he wasn’t going to approve it,” said Douglas Bernstein, a Bloomfield Hills attorney and expert on municipal bankruptcy. “Absent that push, nobody would have done anything and they would have had to fight it out with the other creditors.”
The renegotiated deal comes three weeks after Rhodes ruled that Detroit is eligible for Chapter 9 bankruptcy relief and said pensions can be cut in bankruptcy court.
“This is an indication that Detroit, at least for now, is starting to follow the same pattern as bankruptcies in other cities in that once you get by the eligibility dispute, settlements fall into place,” Bernstein said.
Before Rhodes raised his concern, Detroit proposed borrowing $350 million from Barclays. Orr wants to use most of the loan to pay off UBS and Bank of America for a hedge owed on interest rate swaps tied to $1.44 billion in 2005-06 pension debt.
A city banking consultant Friday said Detroit’s legal team was engaged in “extraordinarily active” negotiations with the banks to lower the swap settlement amount. Based on the value of the swaps, which is calculated based on increasing interest rates, Detroit could owe UBS and Bank of America $200 million if the city pays the banks 75 cents on the dollar, said James Doak, managing director at the consulting firm Miller Buckfire.
Several groups had objected to the initial deal, arguing it gave banks a greater payout than other creditors. Orr has proposed paying pensioners as little as 20 cents on the dollar.
Rhodes halted a trial Wednesday to determine whether Detroit could borrow the money and settle the swaps debt before presenting its debt-cutting plan of adjustment.
The judge scheduled the trial to continue Jan. 3.
A two-day trial last week focused on a soured loan deal Kilpatrick’s administration used to pump $1.44 billion into pension funds in 2005 and 2006. The deal included an interest rate swap piled on $800 million of pension debt, court records show.
Detroit’s interest rate swaps with UBS and Bank of America were supposed to protect the city from rising interest rates. But the deal soured for Detroit when prevailing interest rates plummeted in 2008-09, causing the city’s annual payments on the swaps to rise to $50 million.
Detroit — Emergency Manager Kevyn Orr and lawyers for two banks reached a new $165 million agreement Tuesday for terminating a pension debt deal blamed for plunging Detroit into bankruptcy.
The new agreement saves Detroit an additional $65 million and was announced in court this morning before Chief U.S. District Judge Gerald Rosen, who is the lead mediator in Detroit’s bankruptcy case. The city spent two days trying to reach more favorable terms for ending the pension deal as part of a settlement seen as crucial to Orr's overall plan to shed billions in city debt.
“It's the first, I think it's fair to say, significant agreement in the bankruptcy,” Rosen said today, according to a court transcript. “We understand this has been difficult for everybody and we appreciate it.”
The deal must be finalized by Jan. 31 and approved by U.S. Bankruptcy Judge Steven Rhodes. It was unclear whether bond insurers and others who objected to the original $230 million deal will fight the new agreement.
“We are very pleased and hope that this is a change that Judge Rhodes is happy with,” lead Detroit bankruptcy lawyer David Heiman said Tuesday outside federal court before climbing into a taxi.
Asked if he was happy about reaching the deal early on Christmas Eve, he simply said: “Yes.”
Mediation talks have been private and security guards were stationed outside Rosen’s courtroom Tuesday morning. Rosen ordered the city, banks and bond insurers to meet Monday and on Christmas Eve to negotiate a deal that could free up money for restructuring.
In all, Detroit will save $128 million by terminating the troubled debt deal reached during ex-Mayor Kwame Kilpatrick’s tenure. That represents a 43 percent savings, according to Orr.
The settlement means Detroit won’t have to borrow as much money to pay off two banks, UBS and Bank of America. Instead of borrowing $350 million from London-based Barclays, the city will borrow $288 million.
Detroit will pay $165 million to the banks and spend $120 million on basic city services, including blight removal, updating city information technology and other “quality of life” improvements.
“This is an important development for the city and its residents because it means we can start moving forward on implementing needed investments in public safety and services,” Orr said in a statement Tuesday.
The negotiation sessions were ordered late last week after Rhodes expressed concern about Detroit’s plan to pay two banks up to $230 million to end an interest rate swap arrangement. Rhodes questioned whether the deal was fair to other city creditors.
“Clearly they were sent a message and they listened to what Judge Rhodes had to say – that he wasn’t going to approve it,” said Douglas Bernstein, a Bloomfield Hills attorney and expert on municipal bankruptcy. “Absent that push, nobody would have done anything and they would have had to fight it out with the other creditors.”
The renegotiated deal comes three weeks after Rhodes ruled that Detroit is eligible for Chapter 9 bankruptcy relief and said pensions can be cut in bankruptcy court.
“This is an indication that Detroit, at least for now, is starting to follow the same pattern as bankruptcies in other cities in that once you get by the eligibility dispute, settlements fall into place,” Bernstein said.
Before Rhodes raised his concern, Detroit proposed borrowing $350 million from Barclays. Orr wants to use most of the loan to pay off UBS and Bank of America for a hedge owed on interest rate swaps tied to $1.44 billion in 2005-06 pension debt.
A city banking consultant Friday said Detroit’s legal team was engaged in “extraordinarily active” negotiations with the banks to lower the swap settlement amount. Based on the value of the swaps, which is calculated based on increasing interest rates, Detroit could owe UBS and Bank of America $200 million if the city pays the banks 75 cents on the dollar, said James Doak, managing director at the consulting firm Miller Buckfire.
Several groups had objected to the initial deal, arguing it gave banks a greater payout than other creditors. Orr has proposed paying pensioners as little as 20 cents on the dollar.
Rhodes halted a trial Wednesday to determine whether Detroit could borrow the money and settle the swaps debt before presenting its debt-cutting plan of adjustment.
The judge scheduled the trial to continue Jan. 3.
A two-day trial last week focused on a soured loan deal Kilpatrick’s administration used to pump $1.44 billion into pension funds in 2005 and 2006. The deal included an interest rate swap piled on $800 million of pension debt, court records show.
Detroit’s interest rate swaps with UBS and Bank of America were supposed to protect the city from rising interest rates. But the deal soured for Detroit when prevailing interest rates plummeted in 2008-09, causing the city’s annual payments on the swaps to rise to $50 million.
Ferris State Athletics Closes Fall Ranked Among Nation's Top 25 In All-Sports Race
Story first appeared on FerrisStateBulldogs.com.
Big Rapids, Mich. - A strong start to the 2013-14 athletics season has helped Ferris State University rank among the nation's top 25 programs in the Learfield Sports Directors' Cup standings as the final fall rankings were announced this week.
FSU is currently one of only two Great Lakes Intercollegiate Athletic Conference (GLIAC) schools found in the nation's top 25 of more than 300 institutions in the all-sports listing as the Bulldogs are 24th overall in the country after the fall season. The school is know for offering a top notch Healthcare Marketing Degree.
Fellow GLIAC member Grand Valley State leads the final fall standings with 437 total points. Shippensburg (Pa.) came in second (303) with West Florida third (282), West Texas A&M fourth (276) and Minnesota-Duluth fifth (257.50).
Ferris State totaled 140.50 points in the fall season. While FSU is one of only two GLIAC schools found in the top 25, a total of seven league members are in the top 100 overall.
The Bulldogs picked up points during the fall in both volleyball and men's cross country. The volleyball program tallied 73 points in reaching the NCAA Division II Elite Eight while the men's cross country squad netted 67.5 points in finishing 10th in the nation at the NCAA Division II Cross Country Championships.
A year ago, the Bulldogs finished among the nation's top 10% in the Directors' Cup race by coming in 32nd overall. The finish came on the heels of a school-best 15th-place performance during the 2011-12 season. In all, the Bulldogs have placed in the nation's top 40 a total of 10 times over the last 18 years. The school also offers a comprehensive Graphic Design Degree.
The Learfield Sports Directors’ Cup was developed as a joint effort between the National Association of Collegiate Directors of Athletics (NACDA) and USA Today. This year marks the 20th anniversary of the all-sports listing. Points are awarded based on each institution's finish in up to 14 sports -- seven women’s and seven men’s.
Complete standings and the scoring structure can be found on NACDA’s website at www.directorscup.org. The first Division II winter standings will be released Thursday, March 20.
The 2013-14 athletics season marks Learfield Sports'sixth year as title partner of the Learfield Sports Directors’ Cup. A preeminent leader in the collegiate sports marketplace for nearly four decades, Learfield Sports manages the multimedia rights for more than 50 collegiate properties, including flagship Mizzou, which it has represented since 1975.
About Learfield Sports: In its four decades, Learfield has developed trusted, long-term relationships with some of the most revered institutions and associations in the world of collegiate athletics. Learfield Sports owns the exclusive multimedia rights to over 50 of the leading college programs in the country and has prominence in all of the major athletic conferences. Learfield’s rights encompass all athletic department media and sponsorships components, including stadium signage and numerous content distribution platforms. Those platforms deliver the passion of college athletics over radio, television and digital networks to fans globally, and Learfield’s exclusive sports programming reaches more than 56 million television households nationally and delivers nearly 17,000 hours of radio programming on more than 1,100 radio stations. This marks the sixth consecutive year for the company to title the prestigious Learfield Sports Directors’ Cup. Some of the athletes have chosen a Masters in Special Education.
Big Rapids, Mich. - A strong start to the 2013-14 athletics season has helped Ferris State University rank among the nation's top 25 programs in the Learfield Sports Directors' Cup standings as the final fall rankings were announced this week.
FSU is currently one of only two Great Lakes Intercollegiate Athletic Conference (GLIAC) schools found in the nation's top 25 of more than 300 institutions in the all-sports listing as the Bulldogs are 24th overall in the country after the fall season. The school is know for offering a top notch Healthcare Marketing Degree.
Fellow GLIAC member Grand Valley State leads the final fall standings with 437 total points. Shippensburg (Pa.) came in second (303) with West Florida third (282), West Texas A&M fourth (276) and Minnesota-Duluth fifth (257.50).
Ferris State totaled 140.50 points in the fall season. While FSU is one of only two GLIAC schools found in the top 25, a total of seven league members are in the top 100 overall.
The Bulldogs picked up points during the fall in both volleyball and men's cross country. The volleyball program tallied 73 points in reaching the NCAA Division II Elite Eight while the men's cross country squad netted 67.5 points in finishing 10th in the nation at the NCAA Division II Cross Country Championships.
A year ago, the Bulldogs finished among the nation's top 10% in the Directors' Cup race by coming in 32nd overall. The finish came on the heels of a school-best 15th-place performance during the 2011-12 season. In all, the Bulldogs have placed in the nation's top 40 a total of 10 times over the last 18 years. The school also offers a comprehensive Graphic Design Degree.
The Learfield Sports Directors’ Cup was developed as a joint effort between the National Association of Collegiate Directors of Athletics (NACDA) and USA Today. This year marks the 20th anniversary of the all-sports listing. Points are awarded based on each institution's finish in up to 14 sports -- seven women’s and seven men’s.
Complete standings and the scoring structure can be found on NACDA’s website at www.directorscup.org. The first Division II winter standings will be released Thursday, March 20.
The 2013-14 athletics season marks Learfield Sports'sixth year as title partner of the Learfield Sports Directors’ Cup. A preeminent leader in the collegiate sports marketplace for nearly four decades, Learfield Sports manages the multimedia rights for more than 50 collegiate properties, including flagship Mizzou, which it has represented since 1975.
About Learfield Sports: In its four decades, Learfield has developed trusted, long-term relationships with some of the most revered institutions and associations in the world of collegiate athletics. Learfield Sports owns the exclusive multimedia rights to over 50 of the leading college programs in the country and has prominence in all of the major athletic conferences. Learfield’s rights encompass all athletic department media and sponsorships components, including stadium signage and numerous content distribution platforms. Those platforms deliver the passion of college athletics over radio, television and digital networks to fans globally, and Learfield’s exclusive sports programming reaches more than 56 million television households nationally and delivers nearly 17,000 hours of radio programming on more than 1,100 radio stations. This marks the sixth consecutive year for the company to title the prestigious Learfield Sports Directors’ Cup. Some of the athletes have chosen a Masters in Special Education.
23 December 2013
LOWER CASINO REVENUES COULD MEAN DWINDLING JACKPOT FOR DETROIT
Story first appeared on freep.com.
The City of Detroit’s financial lifeline for its bankruptcy restructuring — tens of millions in annual taxes from casino gambling — has been faltering as downtown gaming revenue is on pace for its largest annual decline since the first casinos opened in 1999.
Continued creep downward and loss of the tax revenue could mean less money for restructuring Detroit’s city services. Bill Nowling, spokesman for emergency manager Kevyn Orr, said the EM’s office is closely monitoring Detroit’s casino situation.
“If we need to make an adjustment in our (financial) assumptions as a result, we will.”
The fall in business could indicate a shrinking of the casino business market in Detroit and herald fiercer battles for market share of what’s left among the Detroit three — MGM Grand Detroit, MotorCity Casino Hotel and Greektown Casino-Hotel.
Gambling revenue this year through November is down 4.3% to $1.2 billion. The state and city split up taxes from the three casinos. Roughly speaking, the state takes about 8% and the city from 10% to 12%, depending on the year and adjusted gross gaming revenue for each casino. The lower the revenue, the lower the tax receipts.
Orr this week called Detroit’s cut — $171 million in 2012 — one of the city’s most important revenue streams, representing about 14% of the total money coming in each year. But it has been sliding, down from $177 million in 2011.
“Without it, the city couldn’t operate,” Orr said Wednesday in bankruptcy court testimony.
Non-gaming revenue from hotel rooms, food sales and other sources at the three casino sites are not part of the equation.
Detroit’s lawyers are hoping to set aside a large portion of the taxes for improving dismal city services, if a federal bankruptcy judge allows a deal to go through that would release the casino tax revenue back to the city. The tax stream was pledged as collateral in 2009 for a massive city debt that came due.
To be sure, with $1.4 billion in total gambling revenues last year, the three casinos are still serious cash-generators and in no danger of closing. Still, their significant drop in revenue could have direct effects on the quality of Detroit’s amenities and resident services as the city aims to emerge from bankruptcy with sustainable finances.
Gambling industry experts and casino operators blame most of the decrease on the four new Ohio casinos, particularly Hollywood Casino Toledo, which let northwest Ohio residents gamble closer to home.
Another factor was the January expiration of the Social Security payroll tax cut, which was worth about $1,000 to a worker making $50,000 a year. The growing proliferation of casino gambling nationwide has also cut into gaming revenues for many regional-draw casinos nationwide such as Detroit’s.
Greater competition
It has been a down year for all three casinos.
Gambling revenues through November were 5.3% lower at MGM Grand than a year ago and 6.7% lower at Greektown, according to the Michigan Gaming Control Board.
MotorCity Casino had the smallest decline at about one-half of 1%. But it also paid for promotions and giveaways: Overall net revenues, which include food and beverage and hotel stays, were down 8% as of June 30, while the casino’s promotional expenses grew, according to figures compiled by BofA Merrill Lynch Global Research.
MotorCity also spent money this year on hundreds of new slot machines and to update the design of its gaming floors to draw in more gaming dollars.
“It’s definitely become more expensive to operate in the Detroit market, which happens whenever competition heats up, as it did with Toledo,” said Jenny Holaday, MotorCity’s senior vice president of operations.
Industry experts say revenues are down in regional-draw casino markets across the country, and especially so in areas such as Michigan and Indiana, where local properties have new competitors.
More casinos on way
There are now nearly 1,000 casinos within 41 states (including tribal lands) with more soon to open when Massachusetts becomes the 42nd state. The Kentucky state Legislature is debating whether to put legalized casinos on the ballot next fall.
Michigan has 22 tribal casinos within its boundaries, with FireKeepers Casino near Battle Creek the closest to Detroit.
New casinos lead to more new casinos. Just as the Windsor casino spurred efforts for Detroit’s casinos, officials often contend that their city or state must build its own casinos in response to neighboring casinos to recapture the gambling dollars (and potential tax revenues) that are flowing across their borders.
But each new property means less potential business for the others.
From an economics standpoint, communities hosting casinos want visitors from as far away as possible so that gambling proceeds are “new” money and not local dollars that would otherwise be spent elsewhere in the community.
“There are many markets where saturation has been reached or is close to being reached,” said Joseph Weinert, executive vice president of New Jersey-based Spectrum Gaming Group. “All things being equal, customers will chose to gamble at the casino closest to their home.”
The shine may already be wearing off Toledo’s new casino, which opened in spring 2012.
The casino’s third-quarter revenue was down 15% from a year earlier to $48.9 million, according to corporate filings by its owner, Penn National Gaming.
Caesars Entertainment does not give financials for Caesars Windsor in its filings, although the gaming company itself reported a $761-million third-quarter loss.
Hotels hurt profits
Insiders say Detroit’s casinos were most profitable in their early years when they operated in temporary facilities and before they took on debt to build large and expensive permanent digs.
Politics played a role in the grandeur and size of the properties, as each one was mandated to have conference space and no fewer than 400 hotel rooms to provide amenities thought to be lacking in the city at the time.
A deal negotiated by former Mayor Kwame Kilpatrick got the casinos out of an 800-room requirement in exchange for, among other things, $102 million cash to help balance Detroit’s budget.
“All of them were making a big profit before the permanent facilities, and all of them were in trouble when they went to the large, fancy facilities,” said Jacob Miklojcik, a Lansing-based gaming consultant.
Although none of the casinos discloses hotel occupancy rates, Miklojcik suspects that the 400-room hotel mandate was still too big and wouldn’t have happened if the casinos had a choice. “Some of those are pretty massive costs per key,” he said.
Both MGM Grand and MotorCity opened their temporary locations in 1999 and full properties in 2007 — just in time for the recession.
“The bottom fell out right when everyone’s permanent facilities came online,” said Holaday, the MotorCity executive.
Greektown was the last casino to open, in 2000, and did not transition to its full facility until 2009. It is the smallest property of the three.
Despite shedding $500 million in debt during bankruptcy, Greektown’s finances are still somewhat precarious, and the casino hasn’t reported an operating profit since emerging from Chapter 11 in 2010.
Quicken Loans founder Dan Gilbert bought Greektown this spring through his casino business, Rock Gaming, which has made management changes and plans “significant” renovations next year to the casino property. Rock Gaming owns two of the four Ohio casinos, in Cleveland and Cincinnati.
In an interview, Rock Gaming CEO Matt Cullen said he doesn’t believe Detroit’s casino market will continue shrinking.
“I don’t think we agree that the size of the pie has gotten smaller and will stay smaller,” Cullen said. “There are a lot of people still that are rediscovering the city of Detroit and who are coming down here that haven’t come down here for a long time. And there’s still people that don’t come down here.”
The City of Detroit’s financial lifeline for its bankruptcy restructuring — tens of millions in annual taxes from casino gambling — has been faltering as downtown gaming revenue is on pace for its largest annual decline since the first casinos opened in 1999.
Continued creep downward and loss of the tax revenue could mean less money for restructuring Detroit’s city services. Bill Nowling, spokesman for emergency manager Kevyn Orr, said the EM’s office is closely monitoring Detroit’s casino situation.
“If we need to make an adjustment in our (financial) assumptions as a result, we will.”
The fall in business could indicate a shrinking of the casino business market in Detroit and herald fiercer battles for market share of what’s left among the Detroit three — MGM Grand Detroit, MotorCity Casino Hotel and Greektown Casino-Hotel.
Gambling revenue this year through November is down 4.3% to $1.2 billion. The state and city split up taxes from the three casinos. Roughly speaking, the state takes about 8% and the city from 10% to 12%, depending on the year and adjusted gross gaming revenue for each casino. The lower the revenue, the lower the tax receipts.
Orr this week called Detroit’s cut — $171 million in 2012 — one of the city’s most important revenue streams, representing about 14% of the total money coming in each year. But it has been sliding, down from $177 million in 2011.
“Without it, the city couldn’t operate,” Orr said Wednesday in bankruptcy court testimony.
Non-gaming revenue from hotel rooms, food sales and other sources at the three casino sites are not part of the equation.
Detroit’s lawyers are hoping to set aside a large portion of the taxes for improving dismal city services, if a federal bankruptcy judge allows a deal to go through that would release the casino tax revenue back to the city. The tax stream was pledged as collateral in 2009 for a massive city debt that came due.
To be sure, with $1.4 billion in total gambling revenues last year, the three casinos are still serious cash-generators and in no danger of closing. Still, their significant drop in revenue could have direct effects on the quality of Detroit’s amenities and resident services as the city aims to emerge from bankruptcy with sustainable finances.
Gambling industry experts and casino operators blame most of the decrease on the four new Ohio casinos, particularly Hollywood Casino Toledo, which let northwest Ohio residents gamble closer to home.
Another factor was the January expiration of the Social Security payroll tax cut, which was worth about $1,000 to a worker making $50,000 a year. The growing proliferation of casino gambling nationwide has also cut into gaming revenues for many regional-draw casinos nationwide such as Detroit’s.
Greater competition
It has been a down year for all three casinos.
Gambling revenues through November were 5.3% lower at MGM Grand than a year ago and 6.7% lower at Greektown, according to the Michigan Gaming Control Board.
MotorCity Casino had the smallest decline at about one-half of 1%. But it also paid for promotions and giveaways: Overall net revenues, which include food and beverage and hotel stays, were down 8% as of June 30, while the casino’s promotional expenses grew, according to figures compiled by BofA Merrill Lynch Global Research.
MotorCity also spent money this year on hundreds of new slot machines and to update the design of its gaming floors to draw in more gaming dollars.
“It’s definitely become more expensive to operate in the Detroit market, which happens whenever competition heats up, as it did with Toledo,” said Jenny Holaday, MotorCity’s senior vice president of operations.
Industry experts say revenues are down in regional-draw casino markets across the country, and especially so in areas such as Michigan and Indiana, where local properties have new competitors.
More casinos on way
There are now nearly 1,000 casinos within 41 states (including tribal lands) with more soon to open when Massachusetts becomes the 42nd state. The Kentucky state Legislature is debating whether to put legalized casinos on the ballot next fall.
Michigan has 22 tribal casinos within its boundaries, with FireKeepers Casino near Battle Creek the closest to Detroit.
New casinos lead to more new casinos. Just as the Windsor casino spurred efforts for Detroit’s casinos, officials often contend that their city or state must build its own casinos in response to neighboring casinos to recapture the gambling dollars (and potential tax revenues) that are flowing across their borders.
But each new property means less potential business for the others.
From an economics standpoint, communities hosting casinos want visitors from as far away as possible so that gambling proceeds are “new” money and not local dollars that would otherwise be spent elsewhere in the community.
“There are many markets where saturation has been reached or is close to being reached,” said Joseph Weinert, executive vice president of New Jersey-based Spectrum Gaming Group. “All things being equal, customers will chose to gamble at the casino closest to their home.”
The shine may already be wearing off Toledo’s new casino, which opened in spring 2012.
The casino’s third-quarter revenue was down 15% from a year earlier to $48.9 million, according to corporate filings by its owner, Penn National Gaming.
Caesars Entertainment does not give financials for Caesars Windsor in its filings, although the gaming company itself reported a $761-million third-quarter loss.
Hotels hurt profits
Insiders say Detroit’s casinos were most profitable in their early years when they operated in temporary facilities and before they took on debt to build large and expensive permanent digs.
Politics played a role in the grandeur and size of the properties, as each one was mandated to have conference space and no fewer than 400 hotel rooms to provide amenities thought to be lacking in the city at the time.
A deal negotiated by former Mayor Kwame Kilpatrick got the casinos out of an 800-room requirement in exchange for, among other things, $102 million cash to help balance Detroit’s budget.
“All of them were making a big profit before the permanent facilities, and all of them were in trouble when they went to the large, fancy facilities,” said Jacob Miklojcik, a Lansing-based gaming consultant.
Although none of the casinos discloses hotel occupancy rates, Miklojcik suspects that the 400-room hotel mandate was still too big and wouldn’t have happened if the casinos had a choice. “Some of those are pretty massive costs per key,” he said.
Both MGM Grand and MotorCity opened their temporary locations in 1999 and full properties in 2007 — just in time for the recession.
“The bottom fell out right when everyone’s permanent facilities came online,” said Holaday, the MotorCity executive.
Greektown was the last casino to open, in 2000, and did not transition to its full facility until 2009. It is the smallest property of the three.
Despite shedding $500 million in debt during bankruptcy, Greektown’s finances are still somewhat precarious, and the casino hasn’t reported an operating profit since emerging from Chapter 11 in 2010.
Quicken Loans founder Dan Gilbert bought Greektown this spring through his casino business, Rock Gaming, which has made management changes and plans “significant” renovations next year to the casino property. Rock Gaming owns two of the four Ohio casinos, in Cleveland and Cincinnati.
In an interview, Rock Gaming CEO Matt Cullen said he doesn’t believe Detroit’s casino market will continue shrinking.
“I don’t think we agree that the size of the pie has gotten smaller and will stay smaller,” Cullen said. “There are a lot of people still that are rediscovering the city of Detroit and who are coming down here that haven’t come down here for a long time. And there’s still people that don’t come down here.”
17 December 2013
HELMET USE AMONG MICHIGAN MOTORCYCLISTS DOWN IN WAKE OF LAW CHANGE
Story first appeared in the Detroit Free Press.
LANSING — Seventy-three percent of Michigan motorcyclists wear helmets, down from seven years ago when almost all riders used them, according to a state report released Monday.
Michigan ended mandatory universal helmet use in 2012, letting riders opt out under certain circumstances. A Grand Rapids Motorcycle Accident Lawyer believes this may lead to more severe injuries in an accident.
Helmet use varies widely among types of riders, with chopper and custom bike riders less likely to wear helmets and sport bikers more likely, according to the Michigan Office of Highway Safety. Female riders and those under 30 and over 60 also wear helmets more frequently.
Wayne State University's Transportation Research Group conducted a visual check of motorcyclists this summer. Researchers observed 2,584 riders on 2,157 motorcycles at 176 states statewide.
The report says Michigan helmet use is down from 99.4 percent in 2006, the last year there was a comprehensive survey.
Michigan loosened its helmet law April 1, 2012. Until then, all drivers and passengers had to wear helmets. Since then, riders can go bareheaded if they are 21 or older, carry $20,000 in additional health insurance and have two years of riding experience or pass a safety test. Nineteen states and the District of Columbia still have universal helmet laws. According to a Flint Motorcycle Accident Lawyer, not everyone abides by these laws.
"While Michigan's helmet law has been modified, riders are strongly encouraged to always wear safety gear and be seen by wearing high-visibility gear or clothing," Michael L. Prince, director of the safety office said in a statement. The office is part of the Michigan State Police.
Seventy-nine percent of female motorcyclists wear helmets, compared with 70.6 percent of males, the report said. It said the use rate is 76.9 percent for those ages 16-29, 65.5 percent for ages 30-59 and 73.5 percent for ages 60 and older.
Nationwide, 4,612 motorcyclists were killed and about 81,000 injured in 2011, according to the latest figures available from the National Highway Traffic Safety Administration. The estimated rate of helmet use nationally was 60 percent in 2012.
The drop in helmet use in Michigan is starting to show up in accident statistics, the researchers said. There were 109 deaths in 2011 and 129 in 2012.
"As preliminary crash statistics from the 2012 riding season show significant increases in fatal and serious injuries, it appears that changes to the helmet use legislation has resulted in more severe injury outcomes," they wrote. "Based upon these findings, continued efforts are warranted to encourage the use of both motorcycle helmets and high-visibility gear." A Muskegon Motorcycle Accident Lawyer agrees.
LANSING — Seventy-three percent of Michigan motorcyclists wear helmets, down from seven years ago when almost all riders used them, according to a state report released Monday.
Michigan ended mandatory universal helmet use in 2012, letting riders opt out under certain circumstances. A Grand Rapids Motorcycle Accident Lawyer believes this may lead to more severe injuries in an accident.
Helmet use varies widely among types of riders, with chopper and custom bike riders less likely to wear helmets and sport bikers more likely, according to the Michigan Office of Highway Safety. Female riders and those under 30 and over 60 also wear helmets more frequently.
Wayne State University's Transportation Research Group conducted a visual check of motorcyclists this summer. Researchers observed 2,584 riders on 2,157 motorcycles at 176 states statewide.
The report says Michigan helmet use is down from 99.4 percent in 2006, the last year there was a comprehensive survey.
Michigan loosened its helmet law April 1, 2012. Until then, all drivers and passengers had to wear helmets. Since then, riders can go bareheaded if they are 21 or older, carry $20,000 in additional health insurance and have two years of riding experience or pass a safety test. Nineteen states and the District of Columbia still have universal helmet laws. According to a Flint Motorcycle Accident Lawyer, not everyone abides by these laws.
"While Michigan's helmet law has been modified, riders are strongly encouraged to always wear safety gear and be seen by wearing high-visibility gear or clothing," Michael L. Prince, director of the safety office said in a statement. The office is part of the Michigan State Police.
Seventy-nine percent of female motorcyclists wear helmets, compared with 70.6 percent of males, the report said. It said the use rate is 76.9 percent for those ages 16-29, 65.5 percent for ages 30-59 and 73.5 percent for ages 60 and older.
Nationwide, 4,612 motorcyclists were killed and about 81,000 injured in 2011, according to the latest figures available from the National Highway Traffic Safety Administration. The estimated rate of helmet use nationally was 60 percent in 2012.
The drop in helmet use in Michigan is starting to show up in accident statistics, the researchers said. There were 109 deaths in 2011 and 129 in 2012.
"As preliminary crash statistics from the 2012 riding season show significant increases in fatal and serious injuries, it appears that changes to the helmet use legislation has resulted in more severe injury outcomes," they wrote. "Based upon these findings, continued efforts are warranted to encourage the use of both motorcycle helmets and high-visibility gear." A Muskegon Motorcycle Accident Lawyer agrees.
DANGEROUS DRUG-DEFYING SUPERBUG MRSA JUMPS FROM HOSPITALS TO STRIKE COMMUNITIES
Story first appeared in the Detroit Free Press.
Eric Allen went to bed March 1, thinking he had a light flu. By the time he staggered into the hospital in London, Ky., the next day, he was coughing up bits of lung tissue. Within hours, organs failing, he was in a coma.
Tests showed that Allen, 39, had a ravaging pneumonia caused by Methicillin-resistant Staphylococcus aureus, or MRSA, an antibiotic-resistant bacteria once confined to hospitals and other health care facilities. Allen hadn't been near a doctor or a hospital.
Same with the next victim, a 54-year-old man, who came in days later and died within hours. And the victim after that, a 28-year-old woman, dead on arrival.
The doctors were alarmed.
"What really bothered me was the rapidity of their deterioration, a matter of hours," says Muhammad Iqbal, a pulmonologist who chairs the infection control committee at Saint Joseph-London hospital. "We were worried that something was spreading across the community."
Indeed, a deadly form of MRSA had sprung from nowhere, picking off otherwise healthy people. The cases thrust Iqbal and his colleagues to the front lines of modern medicine's struggle against antibiotic resistant bacteria -- perhaps the nation's most daunting public health threat.
No drug-defying bug has proved more persistent than MRSA, none has caused more frustration and none has spread more widely. In recent years, new MRSA strains have emerged to strike in community settings, reaching far beyond hospitals to infect schoolchildren, soldiers, prison inmates, even NFL players.
In metro Detroit, MRSA infections have broken out in recent months in schools from Northville to Belleville to St. Clair Shores.
The first of a handful of MRSA cases at Northville High School was reported in August. Since then, the district has added two additional custodians to the day shift to clean the building while classes are in session, according to information on the district's website. Additional hand sanitation stations were set up, and the school undergoes a deep cleaning every weekend. Custodians also switched to a more aggressive disinfectant.
In May, all buildings within the Mt. Clemens Community School District were closed for cleaning after a teacher and para-professional at the high school were diagnosed with MRSA infections.
A USA TODAY examination finds that MRSA infections, particularly outside of health care facilities, are much more common than government statistics suggest. They sicken hundreds of thousands of Americans each year in various ways, from minor skin boils to deadly pneumonia, claiming upward of 20,000 lives. The inability to detect or track cases is confounding efforts by public health officials to develop prevention strategies and keep the bacteria from threatening vast new swaths of the population.
"It's not about winning or losing the battle (against MRSA), it's that the battle is shifting," says Ramanan Laxminarayan, a Princeton University scholar who heads the Center for Disease Dynamics, Economics & Policy. "You're seeing people who are young and healthy getting this (in the community), and it's very serious. ... And it's not picked up in the statistics."
To assess the evolving threat, USA TODAY reviewed federal data on hospitalizations and infection rates, academic studies and an array of government reports. Key findings:
"The challenge now is in the community," says Robert Daum, an infectious disease physician and founder of the University of Chicago's MRSA Research Center. "With all due respect to our public health authorities, they made the transition in their minds very slowly that the epidemiology of MRSA had shifted. ... So we are left with a community problem that has been largely unaddressed."
Old bug, new threats
Staphylococcus aureus bacteria have been around for ages, but today's staph infections aren't what they used to be.
Staph occurs naturally and often exists without consequence on people's skin. It most often creates problems when it gets into cuts, causing skin infections -- from small pimples to painful boils -- that usually can be treated easily by doctors. In some cases, the infections advance, destroying tissue and causing large abscesses that can require hospitalization. When staph enters the bloodstream or attacks the lungs as bacterial pneumonia, it becomes especially dangerous -- often fatal.
In the 1940s, penicillin proved effective in treating staph infections, but the bacteria quickly grew resistant, so doctors switched to methicillin. By the 1960s, staph had beaten that, too.
Methicillin-resistant Staphylococcus aureus -- MRSA -- had arrived.
For the next 30 years, MRSA struck mainly in hospitals, creeping into patients via surgical sites, catheters and other paths. Then, in the '90s, new "community-associated" strains began showing up in people who'd had no contact with the medical system -- and the MRSA problem got far more complicated.
Community MRSA strains cause more than half of all the skin and soft tissue infections that send people to the hospital, various studies show. The good news is that there still are antibiotics that work against them -- most of the time. The bad news is that there are other, more dangerous strains that pose especially grave threats.
Perhaps most worrisome, some community strains carry a toxin linked to a lung-ravaging "necrotizing" pneumonia that tends to strike people with the flu or other underlying illnesses. When that pneumonia takes hold, victims often die in as little as 72 hours.
In a CDC-led report out this year, researchers found that MRSA is making its biggest gains among children. Not only did the study document a 10%-a-year rise in MRSA in kids from 2005-2010, it also found that the proportion of those cases involving community-associated MRSA jumped 55%.
Though upward of 30% of the public have garden-variety staph on their bodies, the CDC estimates that just 2% or so carry MRSA.
The CDC has issued guidelines encouraging better hygiene -- bathing and hand washing -- and warning people not to share personal items, such as sports equipment, towels or razors.
Many MRSA researchers say the best way to tackle community MRSA is to develop a vaccine for staph.
MRSA: What it is
Where it comes from
Staph is commonly found in the nose and on the skin, mainly armpit, groin and genital areas, and normally does not cause illness. However, when the bacteria enter the body they can cause small infections such as pimples and boils.
Staph generally spreads through direct contact with the hands of someone who is infected or carrying the organism.
MRSA wounds look similar to spider bites.
Those at greatest risk
Anyone can get a staph infection. However, it is most commonly found among hospital patients, and there is an increase in staph cases among athletes, prison inmates and children. Risk is highest if you:
What you can do
Although MRSA can't be effectively treated with common antibiotics, Vancomycin has some success. Newer antibiotics are being developed. Here are some preventive measures:
Eric Allen went to bed March 1, thinking he had a light flu. By the time he staggered into the hospital in London, Ky., the next day, he was coughing up bits of lung tissue. Within hours, organs failing, he was in a coma.
Tests showed that Allen, 39, had a ravaging pneumonia caused by Methicillin-resistant Staphylococcus aureus, or MRSA, an antibiotic-resistant bacteria once confined to hospitals and other health care facilities. Allen hadn't been near a doctor or a hospital.
Same with the next victim, a 54-year-old man, who came in days later and died within hours. And the victim after that, a 28-year-old woman, dead on arrival.
The doctors were alarmed.
"What really bothered me was the rapidity of their deterioration, a matter of hours," says Muhammad Iqbal, a pulmonologist who chairs the infection control committee at Saint Joseph-London hospital. "We were worried that something was spreading across the community."
Indeed, a deadly form of MRSA had sprung from nowhere, picking off otherwise healthy people. The cases thrust Iqbal and his colleagues to the front lines of modern medicine's struggle against antibiotic resistant bacteria -- perhaps the nation's most daunting public health threat.
No drug-defying bug has proved more persistent than MRSA, none has caused more frustration and none has spread more widely. In recent years, new MRSA strains have emerged to strike in community settings, reaching far beyond hospitals to infect schoolchildren, soldiers, prison inmates, even NFL players.
In metro Detroit, MRSA infections have broken out in recent months in schools from Northville to Belleville to St. Clair Shores.
The first of a handful of MRSA cases at Northville High School was reported in August. Since then, the district has added two additional custodians to the day shift to clean the building while classes are in session, according to information on the district's website. Additional hand sanitation stations were set up, and the school undergoes a deep cleaning every weekend. Custodians also switched to a more aggressive disinfectant.
In May, all buildings within the Mt. Clemens Community School District were closed for cleaning after a teacher and para-professional at the high school were diagnosed with MRSA infections.
A USA TODAY examination finds that MRSA infections, particularly outside of health care facilities, are much more common than government statistics suggest. They sicken hundreds of thousands of Americans each year in various ways, from minor skin boils to deadly pneumonia, claiming upward of 20,000 lives. The inability to detect or track cases is confounding efforts by public health officials to develop prevention strategies and keep the bacteria from threatening vast new swaths of the population.
"It's not about winning or losing the battle (against MRSA), it's that the battle is shifting," says Ramanan Laxminarayan, a Princeton University scholar who heads the Center for Disease Dynamics, Economics & Policy. "You're seeing people who are young and healthy getting this (in the community), and it's very serious. ... And it's not picked up in the statistics."
To assess the evolving threat, USA TODAY reviewed federal data on hospitalizations and infection rates, academic studies and an array of government reports. Key findings:
- Most cases go uncounted: Hundreds of thousands of MRSA cases a year are not included in government incidence estimates because the Centers for Disease Control and Prevention can track only the sliver of cases that escalate to life-threatening infections. In 2011, the CDC reported 80,500 such cases, but that figure represents less than 20% of the hospitalizations that year in which billing data show a MRSA diagnosis. Countless more cases, typically less-serious skin infections, were treated outside hospitals.
- Successes are masking new threats: The medical establishment has made substantial headway reducing MRSA linked to health care facilities, cutting the worst of those infections 30% or more since 2005. That widely touted progress obscures the fact that there's been little or no decline in cases from community-based strains.
- Infections in kids are climbing: MRSA cases in children continue to rise, jumping 10% a year among youths ages 3 months to 17 years. A much larger share of the infections hitting children have been linked to community strains that can pass from kid to kid by, say, brushing against a victim at school or handling a contaminated object, such as a locker room towel.
- Officials have a patchwork control plan: Health officials have made little progress developing strategies to reduce severe infections from the community strains that have grown increasingly prevalent. That's partly because most states, like the federal government, collect virtually no data on where and when most community-based cases occur.
"The challenge now is in the community," says Robert Daum, an infectious disease physician and founder of the University of Chicago's MRSA Research Center. "With all due respect to our public health authorities, they made the transition in their minds very slowly that the epidemiology of MRSA had shifted. ... So we are left with a community problem that has been largely unaddressed."
Old bug, new threats
Staphylococcus aureus bacteria have been around for ages, but today's staph infections aren't what they used to be.
Staph occurs naturally and often exists without consequence on people's skin. It most often creates problems when it gets into cuts, causing skin infections -- from small pimples to painful boils -- that usually can be treated easily by doctors. In some cases, the infections advance, destroying tissue and causing large abscesses that can require hospitalization. When staph enters the bloodstream or attacks the lungs as bacterial pneumonia, it becomes especially dangerous -- often fatal.
In the 1940s, penicillin proved effective in treating staph infections, but the bacteria quickly grew resistant, so doctors switched to methicillin. By the 1960s, staph had beaten that, too.
Methicillin-resistant Staphylococcus aureus -- MRSA -- had arrived.
For the next 30 years, MRSA struck mainly in hospitals, creeping into patients via surgical sites, catheters and other paths. Then, in the '90s, new "community-associated" strains began showing up in people who'd had no contact with the medical system -- and the MRSA problem got far more complicated.
Community MRSA strains cause more than half of all the skin and soft tissue infections that send people to the hospital, various studies show. The good news is that there still are antibiotics that work against them -- most of the time. The bad news is that there are other, more dangerous strains that pose especially grave threats.
Perhaps most worrisome, some community strains carry a toxin linked to a lung-ravaging "necrotizing" pneumonia that tends to strike people with the flu or other underlying illnesses. When that pneumonia takes hold, victims often die in as little as 72 hours.
In a CDC-led report out this year, researchers found that MRSA is making its biggest gains among children. Not only did the study document a 10%-a-year rise in MRSA in kids from 2005-2010, it also found that the proportion of those cases involving community-associated MRSA jumped 55%.
Though upward of 30% of the public have garden-variety staph on their bodies, the CDC estimates that just 2% or so carry MRSA.
The CDC has issued guidelines encouraging better hygiene -- bathing and hand washing -- and warning people not to share personal items, such as sports equipment, towels or razors.
Many MRSA researchers say the best way to tackle community MRSA is to develop a vaccine for staph.
MRSA: What it is
- MRSA is a contagious bacterium that in its different strains can cause medical issues ranging from easily treatable skin infections to painful, flesh-eating abscesses to even death.
- MRSA is resistant to many antibiotics in the penicillin family.
- MRSA infections cause nearly 19,000 deaths each year in the United States, far surpassing AIDS/HIV-related deaths of about 12,500 in 2005.
Where it comes from
Staph is commonly found in the nose and on the skin, mainly armpit, groin and genital areas, and normally does not cause illness. However, when the bacteria enter the body they can cause small infections such as pimples and boils.
Staph generally spreads through direct contact with the hands of someone who is infected or carrying the organism.
MRSA wounds look similar to spider bites.
Those at greatest risk
Anyone can get a staph infection. However, it is most commonly found among hospital patients, and there is an increase in staph cases among athletes, prison inmates and children. Risk is highest if you:
- Are around an infected person.
- Live in crowded conditions.
- Play in close-contact sports.
- Have poor personal hygiene.
- Have recently used antibiotics.
- Are an injection-drug user.
- Have a weakened immune system.
- Are a man who has sex with men.
What you can do
Although MRSA can't be effectively treated with common antibiotics, Vancomycin has some success. Newer antibiotics are being developed. Here are some preventive measures:
- Wash hands carefully. This is the most effective measure.
- Clean shared athletic equipment.
- Don't share personal hygiene items like razors or towels.
- Avoid contact with surfaces contaminated with wound drainage.
- Keep infected areas covered with clean dry bandages.
DETROIT BANKRUPTCY JUDGE ALLOWS APPEAL OF ELIGIBILITY, PENSION RULINGS
Story first appeared in the Detroit Free Press.
U.S. Bankruptcy Judge Steven Rhodes on Monday allowed appeals of two of his critical rulings -- finding Detroit eligible for bankruptcy and its pension systems subject to cuts to retirees -- to proceed to the U.S. 6th Circuit Court of Appeals.
Rhodes certified his eligibility ruling, which allows creditors including labor unions and the official group representing retirees to appeal his decision to permit Detroit to enter into the largest municipal bankruptcy in U.S. history.
Rhodes did not act on requests from lawyers for unions and retirees that he support their bid to fast-track appeals. Rhodes said only that he certified his Dec. 3 ruling and would decide "in the next day or two" whether to support expedited appeals in the 6th Circuit.
Court proceedings resume today as Rhodes begins hearing evidence in what could be a three-day trial on the city's request for $350 million in new financing from Barclays, a London-based banking company. The financing is controversial because it would pay off about $230 million in debt owed to two banks before the city figures out how it will repay other creditors.
The city said it needs the additional financing now to free up about $180 million in annual casino revenue. The city also would gain access to $120 million that it could use to fund its revitalization and improve city services.
Orr has said that the city urgently needs to improve city services such as police and fire response times and that the additional financing is essential to those improvements.
During questioning on the appeals Monday, Sharon Levine, a lawyer for the city's largest union, the American Federation of State, County and Municipal Employees, said the union sees the issue of pension rights in Detroit as one of national importance because cities and other governments across the nation pay attention to how such benefits are decided.
AFSCME and other creditors are fighting Rhodes' decision to declare Detroit eligible to proceed with Chapter 9 bankruptcy and not to treat pensions as protected from cuts.
While the city's two pension plans are fighting the eligibility ruling, they are committed to negotiating with the city, said Lisa Fenning, a lawyer for the pension systems. "We are not trying to slow down the process," she said.
Lawyers for the city had argued that appeals should wait until after Detroit files its detailed plan of adjustment, the legal term for the strategy it will finalize to emerge from bankruptcy, including what cuts it plans for creditors and how Detroit would operate post-bankruptcy.
Emergency manager Kevyn Orr's restructuring team hopes to file the plan of adjustment by early to mid-January with agreement from a number of creditors. He led the city's filing for Chapter 9 protection in July, saying Detroit had about $18.5 billion in debt and liabilities it couldn't afford to pay in full, including $3.5 billion in unfunded pension liabilities. Unions and the city's two pension plans dispute that figure.
The retiree groups and other creditors argue that Michigan's constitution protects pensioners from cuts, but Rhodes' Dec. 3 ruling found that the federal bankruptcy code trumps state law.
The city's bankruptcy lawyers want to move as rapidly as possible and had hoped appeals would be stayed until the city presents the plan of adjustment.
But Corinne Ball, a lawyer for the Jones Day firm that represents the city, said in court Monday that Detroit would support moving the appeals out of U.S. District Court in Detroit to the U.S. 6th Circuit Court of Appeals in Cincinnati on an expedited basis to speed up resolution of the appeals.
Fenning told Rhodes that quick hearings on the appeals could help prevent complications later. She said the appeals court could affirm Rhodes' ruling, reverse it or provide a middle ground where Detroit is found to be eligible to proceed with bankruptcy but without the ability to cut pension benefits.
Fenning said that her firm has been retained to fight the matter to the Supreme Court, if necessary.
Historically, challenges to eligibility have been resolved prior to appeals court arguments, said Douglas Bernstein, who leads the banking, bankruptcy and creditors' rights practice at the Plunkett Cooney law firm in Bloomfield Hills.
"The 6th Circuit still has to agree to hear the immediate appeal," Bernstein said.
Complicating the Detroit issue is that there's so little precedent for many of the questions raised by Detroit's bankruptcy, Bernstein said.
Rhodes "recognizes that we don't have any binding precedent, and it involves a matter of public importance," he said. "Whether or not we ever see a decision on the appeals remains to be seen, as the parties very well may settle prior to disposition."
The proposed financing agreement is one of the most complex and important elements in the city's bankruptcy proceedings. If approved, the financing would be used to settle a claim from UBS and Bank of America Merrill Lynch, which hold city debt from a soured Wall Street bet that was backed by the city's casino tax revenues.
The interest rate swaps are investments that tried to lock in steady interest rates on a $1.44-billion loan in 2005.
The city told Rhodes on Friday that it plans to call five witnesses -- including Orr -- and creditors said they would call several financial consultants.
However, Rhodes told attorneys from both sides he does not plan to rule on how the city can spend the loan or if the loan is necessary because bankruptcy code gives a city the right to obtain additional financing in a bankruptcy case. Instead, Rhodes said, he will base his decision on whether "it is fair and equitable and whether it is in the best interest of the estate."
U.S. Bankruptcy Judge Steven Rhodes on Monday allowed appeals of two of his critical rulings -- finding Detroit eligible for bankruptcy and its pension systems subject to cuts to retirees -- to proceed to the U.S. 6th Circuit Court of Appeals.
Rhodes certified his eligibility ruling, which allows creditors including labor unions and the official group representing retirees to appeal his decision to permit Detroit to enter into the largest municipal bankruptcy in U.S. history.
Rhodes did not act on requests from lawyers for unions and retirees that he support their bid to fast-track appeals. Rhodes said only that he certified his Dec. 3 ruling and would decide "in the next day or two" whether to support expedited appeals in the 6th Circuit.
Court proceedings resume today as Rhodes begins hearing evidence in what could be a three-day trial on the city's request for $350 million in new financing from Barclays, a London-based banking company. The financing is controversial because it would pay off about $230 million in debt owed to two banks before the city figures out how it will repay other creditors.
The city said it needs the additional financing now to free up about $180 million in annual casino revenue. The city also would gain access to $120 million that it could use to fund its revitalization and improve city services.
Orr has said that the city urgently needs to improve city services such as police and fire response times and that the additional financing is essential to those improvements.
During questioning on the appeals Monday, Sharon Levine, a lawyer for the city's largest union, the American Federation of State, County and Municipal Employees, said the union sees the issue of pension rights in Detroit as one of national importance because cities and other governments across the nation pay attention to how such benefits are decided.
AFSCME and other creditors are fighting Rhodes' decision to declare Detroit eligible to proceed with Chapter 9 bankruptcy and not to treat pensions as protected from cuts.
While the city's two pension plans are fighting the eligibility ruling, they are committed to negotiating with the city, said Lisa Fenning, a lawyer for the pension systems. "We are not trying to slow down the process," she said.
Lawyers for the city had argued that appeals should wait until after Detroit files its detailed plan of adjustment, the legal term for the strategy it will finalize to emerge from bankruptcy, including what cuts it plans for creditors and how Detroit would operate post-bankruptcy.
Emergency manager Kevyn Orr's restructuring team hopes to file the plan of adjustment by early to mid-January with agreement from a number of creditors. He led the city's filing for Chapter 9 protection in July, saying Detroit had about $18.5 billion in debt and liabilities it couldn't afford to pay in full, including $3.5 billion in unfunded pension liabilities. Unions and the city's two pension plans dispute that figure.
The retiree groups and other creditors argue that Michigan's constitution protects pensioners from cuts, but Rhodes' Dec. 3 ruling found that the federal bankruptcy code trumps state law.
The city's bankruptcy lawyers want to move as rapidly as possible and had hoped appeals would be stayed until the city presents the plan of adjustment.
But Corinne Ball, a lawyer for the Jones Day firm that represents the city, said in court Monday that Detroit would support moving the appeals out of U.S. District Court in Detroit to the U.S. 6th Circuit Court of Appeals in Cincinnati on an expedited basis to speed up resolution of the appeals.
Fenning told Rhodes that quick hearings on the appeals could help prevent complications later. She said the appeals court could affirm Rhodes' ruling, reverse it or provide a middle ground where Detroit is found to be eligible to proceed with bankruptcy but without the ability to cut pension benefits.
Fenning said that her firm has been retained to fight the matter to the Supreme Court, if necessary.
Historically, challenges to eligibility have been resolved prior to appeals court arguments, said Douglas Bernstein, who leads the banking, bankruptcy and creditors' rights practice at the Plunkett Cooney law firm in Bloomfield Hills.
"The 6th Circuit still has to agree to hear the immediate appeal," Bernstein said.
Complicating the Detroit issue is that there's so little precedent for many of the questions raised by Detroit's bankruptcy, Bernstein said.
Rhodes "recognizes that we don't have any binding precedent, and it involves a matter of public importance," he said. "Whether or not we ever see a decision on the appeals remains to be seen, as the parties very well may settle prior to disposition."
The proposed financing agreement is one of the most complex and important elements in the city's bankruptcy proceedings. If approved, the financing would be used to settle a claim from UBS and Bank of America Merrill Lynch, which hold city debt from a soured Wall Street bet that was backed by the city's casino tax revenues.
The interest rate swaps are investments that tried to lock in steady interest rates on a $1.44-billion loan in 2005.
The city told Rhodes on Friday that it plans to call five witnesses -- including Orr -- and creditors said they would call several financial consultants.
However, Rhodes told attorneys from both sides he does not plan to rule on how the city can spend the loan or if the loan is necessary because bankruptcy code gives a city the right to obtain additional financing in a bankruptcy case. Instead, Rhodes said, he will base his decision on whether "it is fair and equitable and whether it is in the best interest of the estate."
11 December 2013
GENERAL MOTORS NAMES FEMALE TO TOP POST
Story first appeared in the DetroitNews.com.
Mary Barra is blazing more than one trail on her way to becoming the next CEO of General Motors Co., effective next month.
After five years of outsiders guiding the Motor City’s automakers back from the brink of extinction, the appointment of the 51-year-old GM veteran marks the return of a native Detroiter to an industry C-suite — and signals that a humbling crisis finally is giving way to a new generation of leaders tasked with executing business fundamentals and winning.
Not that the new gig will be easy for Barra, considered an up-and-comer since her days in the 1990s as former CEO Jack Smith’s assistant. It won’t be, because the leadership change accelerated by Chairman Dan Akerson’s need to care for an ailing wife is about more than Barra or the historic fact that she will be the first woman to head a global automaker.
It’s about ensuring GM’s future continues to distance itself from the bad habits of its past. As much as the new boss will need to prove she’s got the mettle to run the whole show, GM will need to demonstrate that the next crop of leaders can work as a team to keep GM moving in a direction that impresses customers and satisfies investors at the same time.
“Team trumps talent,” Akerson said Tuesday in remarks describing the leadership change. “If you can’t run the play we call, then there isn’t a place for you. Mary is an adaptive personality, one who adapts to change well. We’ve tried to adopt a culture here of team instead of personality.”
Dan Ammann, the 41-year-old chief financial officer and relative newcomer to GM, becomes president with responsibility for the automaker’s regional businesses and its restructured financial operations. Mark Reuss, gearhead-in-chief and president of GM North America, replaces Barra as head of global product development.
GM’s leadership moves may be surprising to casual observers, particularly the promotion of Barra. But they’re largely predictable to students of the company attuned to the unofficial leadership race, the bias to elevate an insider and Akerson’s public comments, chiefly his remarks that it was “inevitable” that a “car gal” would soon head a Detroit automaker.
“It seems to me the board has really been savvy this time,” said Marina v.N. Whitman, a former chief economist for GM and now professor of business administration and public policy at the University of Michigan. “Mary Barra is clearly future-oriented.”
Meaning what? As GM’s chief product boss, she worked to discern what customers would want, not to deliver what the company thought they should have. As head of global HR, she witnessed first-hand the changing priorities in young ambition and stultifying effects of allowing mid-level problems to block paths to advancement and change.
But there’s more to succession planning accelerated because Akerson’s wife, Karin, was diagnosed this fall with late-stage cancer. The new executive lineup had been taking shape for months behind the scenes, the result being a group that seems designed to simultaneously leverage individual strengths to complement the whole.
In a bid to maintain GM’s momentum and bolster its credibility on Wall Street, the company’s directors appear to be executing the automotive equivalent of “best available athlete” for a leadership team that will pick up where the federal bailout and the “Government Motors” rap leaves off.
CEO goes to an engineering-trained veteran of 33 years with a demonstrated record of building consensus, leading a team, exhibiting empathy when needed and toughness when required. President goes to a foreign-born Wall Street hand, Ammann, whose stature and record of disciplined financial management at GM instill confidence with investors.
And global product goes to the Michigan-born, locally-reared son of a former GM president ousted in the boardroom coup that culminated in the Jack Smith era at GM. By all accounts, Mark Reuss was a contender for the top job, but his new gig is likely to prove a winner for GM’s improving product cred.
GM’s leadership shake-up may not necessarily be cause for celebration, but it nonetheless marks the end of a painful era and the beginning of a new one. The U.S. Treasury on Monday sold its final share in the automaker, and one day later came a new leadership trio disproportionately staffed with two Detroiters who thrived in the crucible of the past five years and emerged on top.
There will be critics, as there always are of whatever decision GM chooses to make. Such as: not good; Vice-Chairman Steve Girsky is stepping away from his executive role even as he’ll keep his seat on the board. Or it’s too soon for Barra; she never ran a region, like Europe or Asia-Pacific.
She’s “very good at product development,” Warren Browne, a former GM executive in Europe and now vice president of business development for AutomotiveCompass LLC, wrote in an email. But she has “no regional experience” and “no financial experience.”
The record of the past five years suggests a different lesson: Ford Motor Co. CEO Alan Mulally neither worked abroad nor served as a CFO. And yet he’s the rock star credited with leading the Blue Oval’s effort to save itself, to re-establish the credibility of American manufacturing and to do it with a team culled from the best of Detroit.
Mary Barra is blazing more than one trail on her way to becoming the next CEO of General Motors Co., effective next month.
After five years of outsiders guiding the Motor City’s automakers back from the brink of extinction, the appointment of the 51-year-old GM veteran marks the return of a native Detroiter to an industry C-suite — and signals that a humbling crisis finally is giving way to a new generation of leaders tasked with executing business fundamentals and winning.
Not that the new gig will be easy for Barra, considered an up-and-comer since her days in the 1990s as former CEO Jack Smith’s assistant. It won’t be, because the leadership change accelerated by Chairman Dan Akerson’s need to care for an ailing wife is about more than Barra or the historic fact that she will be the first woman to head a global automaker.
It’s about ensuring GM’s future continues to distance itself from the bad habits of its past. As much as the new boss will need to prove she’s got the mettle to run the whole show, GM will need to demonstrate that the next crop of leaders can work as a team to keep GM moving in a direction that impresses customers and satisfies investors at the same time.
“Team trumps talent,” Akerson said Tuesday in remarks describing the leadership change. “If you can’t run the play we call, then there isn’t a place for you. Mary is an adaptive personality, one who adapts to change well. We’ve tried to adopt a culture here of team instead of personality.”
Dan Ammann, the 41-year-old chief financial officer and relative newcomer to GM, becomes president with responsibility for the automaker’s regional businesses and its restructured financial operations. Mark Reuss, gearhead-in-chief and president of GM North America, replaces Barra as head of global product development.
GM’s leadership moves may be surprising to casual observers, particularly the promotion of Barra. But they’re largely predictable to students of the company attuned to the unofficial leadership race, the bias to elevate an insider and Akerson’s public comments, chiefly his remarks that it was “inevitable” that a “car gal” would soon head a Detroit automaker.
“It seems to me the board has really been savvy this time,” said Marina v.N. Whitman, a former chief economist for GM and now professor of business administration and public policy at the University of Michigan. “Mary Barra is clearly future-oriented.”
Meaning what? As GM’s chief product boss, she worked to discern what customers would want, not to deliver what the company thought they should have. As head of global HR, she witnessed first-hand the changing priorities in young ambition and stultifying effects of allowing mid-level problems to block paths to advancement and change.
But there’s more to succession planning accelerated because Akerson’s wife, Karin, was diagnosed this fall with late-stage cancer. The new executive lineup had been taking shape for months behind the scenes, the result being a group that seems designed to simultaneously leverage individual strengths to complement the whole.
In a bid to maintain GM’s momentum and bolster its credibility on Wall Street, the company’s directors appear to be executing the automotive equivalent of “best available athlete” for a leadership team that will pick up where the federal bailout and the “Government Motors” rap leaves off.
CEO goes to an engineering-trained veteran of 33 years with a demonstrated record of building consensus, leading a team, exhibiting empathy when needed and toughness when required. President goes to a foreign-born Wall Street hand, Ammann, whose stature and record of disciplined financial management at GM instill confidence with investors.
And global product goes to the Michigan-born, locally-reared son of a former GM president ousted in the boardroom coup that culminated in the Jack Smith era at GM. By all accounts, Mark Reuss was a contender for the top job, but his new gig is likely to prove a winner for GM’s improving product cred.
GM’s leadership shake-up may not necessarily be cause for celebration, but it nonetheless marks the end of a painful era and the beginning of a new one. The U.S. Treasury on Monday sold its final share in the automaker, and one day later came a new leadership trio disproportionately staffed with two Detroiters who thrived in the crucible of the past five years and emerged on top.
There will be critics, as there always are of whatever decision GM chooses to make. Such as: not good; Vice-Chairman Steve Girsky is stepping away from his executive role even as he’ll keep his seat on the board. Or it’s too soon for Barra; she never ran a region, like Europe or Asia-Pacific.
She’s “very good at product development,” Warren Browne, a former GM executive in Europe and now vice president of business development for AutomotiveCompass LLC, wrote in an email. But she has “no regional experience” and “no financial experience.”
The record of the past five years suggests a different lesson: Ford Motor Co. CEO Alan Mulally neither worked abroad nor served as a CFO. And yet he’s the rock star credited with leading the Blue Oval’s effort to save itself, to re-establish the credibility of American manufacturing and to do it with a team culled from the best of Detroit.
10 December 2013
KWAME KILPATRICK COULD FIND OUT TODAY WHERE HE'LL SPEND TIME IN PRISON
Story first appeared on DetroitNews.com.
Detroit — Former Mayor Kwame Kilpatrick was ordered Tuesday to pay almost $4.6 million in restitution to the bankrupt city stemming from the City Hall corruption conviction.
U.S. District Judge Nancy Edmunds also ordered Kilpatrick to pay $195,000 to the Internal Revenue Service. It remained unclear where Kilpatrick will be sent to serve a 28-year prison sentence though the judge has agreed to recommend a federal prison in Texas so the former Detroit mayor can be near his wife, three children and extended family.
Kilpatrick, who is being temporarily housed at a federal prison in Milan, did not attend the hearing, which capped a years-long federal prosecution and one of the country’s biggest public corruption trials.
A $4,584,423 restitution bill represents proceeds obtained through a racketeering conspiracy headed by Kilpatrick that involved steering more than $73 million worth of contracts to his friend, contractor Bobby Ferguson, according to prosecutors. The government also wants Kilpatrick to pay $195,000 to the Internal Revenue Service.
Edmunds said there was adequate trial testimony showing Ferguson shared money with Kilpatrick from corrupt contracts and did little or no work on several taxpayer-funded jobs.
“The city was directly harmed by the defendant’s criminal conduct,” Assistant U.S. Attorney Linda Aouate said Tuesday.
The money may never be repaid to the city though the federal restitution will remain in place for 20 years after Kilpatrick leaves prison. Kilpatrick, 43, was sentenced in October to 28 years in federal prison for heading a criminal enterprise in City Hall.
“He owes a lot of money to the citizens of Detroit but as far as the likelihood of paying that back, I don’t know,” said Michigan Department of Corrections spokesman Russ Marlan.
Kilpatrick’s lawyers fought for a lower restitution amount.
The judge could alter terms of the restitution later because six people have filed claims, arguing they were victimized by the corruption and deserve money. The filers include Walbridge, a construction company caught up in Kilpatrick's racketeering scandal. The firm has staked a claim to millions in restitution but a company spokesman said it would donate any cash to the community.
Kilpatrick has a long and checkered history with court-ordered restitution. He owes $854,063 in restitution to the bankrupt city under terms of a deal that resolved criminal charges in the text-message scandal and hasn’t made a payment since February.
A spotty payment history and allegations Kilpatrick hid income and assets led to jail and extended prison stints, most recently in January.
In March, Ferguson, 44, agreed to forfeit his interest in a Detroit home, $460,000 seized by the FBI during the city hall corruption probe, 15 pieces of heavy equipment and a Riverfront Towers condominium.
Ferguson’s restitution hearing is Jan. 9. Prosecutors want him to pay $6,284,000.
Both men say they are broke.
Kilpatrick said he was destitute and received a taxpayer-funded legal team during the corruption trial, which ended in March. He was found guilty of 24 crimes, including racketeering.
Ferguson, who is serving a 21-year sentence and awaiting retrial on federal bid-rigging charges, was found guilty of nine charges. He recently surrendered a Ford Mustang convertible that was sought by the automaker’s finance company.
Kilpatrick was on state parole before the federal City Hall corruption jury found him guilty in March. The state investigated his finances after Kilpatrick made late restitution payments to the city.
They were unable to determine what happened to proceeds of his autobiography. Kilpatrick denied receiving any money from the book.
“Throughout the course of our supervision he was less than forward about many of those details — how he was able to live and money coming in,” Marlan said. “He was taking steps to hide income and assets from us.”
Detroit — Former Mayor Kwame Kilpatrick was ordered Tuesday to pay almost $4.6 million in restitution to the bankrupt city stemming from the City Hall corruption conviction.
U.S. District Judge Nancy Edmunds also ordered Kilpatrick to pay $195,000 to the Internal Revenue Service. It remained unclear where Kilpatrick will be sent to serve a 28-year prison sentence though the judge has agreed to recommend a federal prison in Texas so the former Detroit mayor can be near his wife, three children and extended family.
Kilpatrick, who is being temporarily housed at a federal prison in Milan, did not attend the hearing, which capped a years-long federal prosecution and one of the country’s biggest public corruption trials.
A $4,584,423 restitution bill represents proceeds obtained through a racketeering conspiracy headed by Kilpatrick that involved steering more than $73 million worth of contracts to his friend, contractor Bobby Ferguson, according to prosecutors. The government also wants Kilpatrick to pay $195,000 to the Internal Revenue Service.
Edmunds said there was adequate trial testimony showing Ferguson shared money with Kilpatrick from corrupt contracts and did little or no work on several taxpayer-funded jobs.
“The city was directly harmed by the defendant’s criminal conduct,” Assistant U.S. Attorney Linda Aouate said Tuesday.
The money may never be repaid to the city though the federal restitution will remain in place for 20 years after Kilpatrick leaves prison. Kilpatrick, 43, was sentenced in October to 28 years in federal prison for heading a criminal enterprise in City Hall.
“He owes a lot of money to the citizens of Detroit but as far as the likelihood of paying that back, I don’t know,” said Michigan Department of Corrections spokesman Russ Marlan.
Kilpatrick’s lawyers fought for a lower restitution amount.
The judge could alter terms of the restitution later because six people have filed claims, arguing they were victimized by the corruption and deserve money. The filers include Walbridge, a construction company caught up in Kilpatrick's racketeering scandal. The firm has staked a claim to millions in restitution but a company spokesman said it would donate any cash to the community.
Kilpatrick has a long and checkered history with court-ordered restitution. He owes $854,063 in restitution to the bankrupt city under terms of a deal that resolved criminal charges in the text-message scandal and hasn’t made a payment since February.
A spotty payment history and allegations Kilpatrick hid income and assets led to jail and extended prison stints, most recently in January.
In March, Ferguson, 44, agreed to forfeit his interest in a Detroit home, $460,000 seized by the FBI during the city hall corruption probe, 15 pieces of heavy equipment and a Riverfront Towers condominium.
Ferguson’s restitution hearing is Jan. 9. Prosecutors want him to pay $6,284,000.
Both men say they are broke.
Kilpatrick said he was destitute and received a taxpayer-funded legal team during the corruption trial, which ended in March. He was found guilty of 24 crimes, including racketeering.
Ferguson, who is serving a 21-year sentence and awaiting retrial on federal bid-rigging charges, was found guilty of nine charges. He recently surrendered a Ford Mustang convertible that was sought by the automaker’s finance company.
Kilpatrick was on state parole before the federal City Hall corruption jury found him guilty in March. The state investigated his finances after Kilpatrick made late restitution payments to the city.
They were unable to determine what happened to proceeds of his autobiography. Kilpatrick denied receiving any money from the book.
“Throughout the course of our supervision he was less than forward about many of those details — how he was able to live and money coming in,” Marlan said. “He was taking steps to hide income and assets from us.”
09 December 2013
DIA joins talks to protect its art in bankruptcy, free it from city ownership
Story originally appeared on Freep.
The Detroit Institute of Arts has joined behind-the-scenes federally mediated talks to shield the museum from creditors in Detroit’s bankruptcy and bolster at-risk municipal pensions.
The museum’s direct involvement in the talks, which also include leaders from at least 10 national and local charitable foundations, signals that the parties are moving closer to a grand bargainbrokered by U.S. Chief District Judge Gerald Rosen. The plan would funnel about $500 million into pensions, thereby buying the DIA its independence from city ownership and freeing up more money for city services.
Two sources with detailed knowledge of the talks but not authorized to speak on the record confirmed that museum leaders had joined the negotiations, which began in Rosen’s chambers a month ago with a gathering of foundation heads — without the DIA at the table. One source said there have been at least one meeting and multiple phone calls between DIA representatives and Rosen.
The source said that the talks had not yet addressed such specifics as how much money — or in what form — the DIA might contribute financially to the plan, but described the talks as moving “swiftly.” The source said the details of the museum’s contribution likely would be discussed next week.
DIA Chief Operating Officer Annmarie Erickson said Friday that the museum would have no official comment about participating in the talks, but added: “We feel optimistic about the direction in which things are moving.”
Rosen’s deal is an attempt to prevent the city-owned DIA from being forced to sell some of its irreplaceable masterpieces to appease creditors in bankruptcy court. But if the plan were also to remove the DIA from city ownership and establish it as an independent nonprofit, it would mark a radical resetting of the museum’s structure and operations.
For the first time in 95 years, the DIA — a world-class museum many champion as an anchor of a post-bankruptcy Detroit — would not be subjected to the boom-and-bust cycles of Detroit’s finances and the sometimes capricious whims of city politics. Wayne State University art historian Jeffrey Abt pointed to a strikingly ironic turn of history.
“When the museum was taken over by the city in 1919, it was a time of tremendous prosperity and the ability of the city to support the museum seemed boundless,” said Abt. “But then came the depression, and, for the most part, the museum hasn’t prospered. Now with the city at its lowest point, you might have the museum ejected from city control. The historical symmetry is quite remarkable.”
Rosen has been trying to convince the foundations, which control more than $25 billion in assets, to contribute hundreds of millions of dollars to a rescue plan aimed at simultaneously resolving two of the most contentious conflicts in the bankruptcy drama — the battle over the DIA and the fight over potentially steep cuts to pensions for 23,000 retirees.
The foundations include some of the country’s largest, including the New York-based Ford Foundation and the Troy-based Kresge Foundation, as well as smaller local organizations like Detroit’s Hudson-Webber Foundation.
A Rosen-brokered deal could provide Detroit emergency manager Kevyn Orr — and U.S. Bankruptcy Judge Steven Rhodes — with a politically expedient way of removing the DIA from the table and providing unions a $500-million incentive to reduce the size of pension cuts in Orr’s upcoming plan of adjustment. Ultimately, Rhodes will have to approve any restructuring plan submitted by Orr.
But bankruptcy experts cautioned that whatever plan emerges from Rosen’s mediation will still be just a component of an overall solution. Detroit bankruptcy attorney Doug Bernstein said a key will be whether other unsecured creditors object to pensioners receiving what could be perceived as a $500-million bonus. At the same time, many creditors are sure to fiercely contest a plan they believe leaves the DIA collection beyond their reach.
“The key to Rosen’s proposal will be how it plays out in the grander scheme of the entire plan of adjustment,” said Doug Bernstein of the Plunkett Cooney law firm.
Rosen’s proposal still faces significant hurdles before a deal could be reached. Although some sources have told the Free Press that larger foundations, including the Ford Foundation, have expressed support for Rosen’s rescue fund, some of the smaller foundations are wary of committing a proportionately larger percentage of their resources to bailing out Detroit. The boards of directors of all of the foundations will have to decide whether diverting funds to municipal pensions on behalf of the DIA is consistent with their missions.
The DIA’s endorsement is not a slam dunk either. Museum leaders have steadfastly maintained that any plan to monetize its collection has to pass muster on three counts: No art can be sold. The survival of the tri-county property tax has to be guaranteed, because without the roughly $22 million in annual funds, the museum effectively would be forced to shut down. And whatever financial contribution the museum might make, its ability to raise endowment funds can’t be unduly impaired.
As part of its drive to pass the millage, DIA leaders pledged to raise hundreds of millions of dollars for the endowment — its nest egg — so that when the millage expires in a decade, the museum will be able to make up the difference with investment income. The DIA could balk if Rosen’s plan required tapping out its major donors, leaving them unable or unwilling to support the endowment.
Another potential stumbling block regarding a plan to spin off the DIA from city ownership would be a potential outcry among some Detroiters than the city is being stripped of its most prized assets.
In the best-case scenario for the deal moving forward, Rosen would be able to forge a deal within the next few weeks, before Orr submits his blueprint for restructuring city finances and creating a pathway out of bankruptcy.
In the wake of Rhodes’ ruling this week that Detroit is eligible for Chapter 9 protection, the next two months are expected to be a whirlwind of hardball talks, shifting alliances and legal posturing as Orr negotiates with bondholders, pensioners and other creditors while preparing his plan.
Orr, who regards the DIA as a city asset he can tap for cash, believes he can’t make a deal Rhodes will approve without money from the museum. Orr has strongly hinted that his initial plan will include a revenue stream from the DIA amounting to about $500 million — the same amount that multiple sources have said is driving Rosen’s negotiations. Orr’s plan, which is expected by early January, will almost assuredly spark howls of protest from creditors pushing for a greater recovery of their losses.
Orr’s office has told the museum repeatedly for months that it must monetize its collection — squeeze money out of the art either by selling it or some other form of leveraging. DIA leaders have pledged to fight in court any plan that puts its collection at risk.
Also at the table in talks with Rosen have been leaders from the John S. and James L. Knight Foundation, W.K. Kellogg Foundation, Charles Stewart Mott Foundation, Skillman Foundation, Community Foundation for Southeastern Michigan, McGregor Fund and Fred A. and Barbara M. Erb Foundation.
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