Obama, Michigan in Talks to Free up $100M to Aid Detroit Pension Deal

Matt Helms et al., Detroit Free Press, April 16, 2014

The Obama administration and state officials are in discussions on a deal that would free up an additional $100 million to soften the blow to Detroit pensioners, two people familiar with the talks told the Free Press late Tuesday.

The two sources, who spoke on condition of anonymity because they weren’t authorized to disclose the information, confirmed that there have been talks about the federal government supporting a move by the state to give Detroit $100 million in federal money for blight remediation. That, in turn, would free up $100 million of the more than $500 million that emergency manager Kevyn Orr planned to spend for blight removal over the next 10 years. Orr could then use that money to reduce pension cuts.

The federal funds would come from the Hardest Hit Fund, a $7.6-billion Obama administration effort established in 2010 to help the 18 states most hurt by the housing downturn.

Michigan received $498.6 million to operate homeowner assistance programs, including those offering mortgage subsidies, home loan rescues, mortgage modifications and principal debt reductions.

But as of last summer, only a portion–about $2 billion nationwide and about $94 million in Michigan–had been spent.

It was at that time that the U.S. Treasury allowed the Michigan State Housing Development Authority to use up to $100 million in unspent funds on demolitions in five cities, with the bulk going to Detroit.

The $100 million that’s now the focus of negotiations is separate from the $100 million that was set aside for blight removal in Detroit, Flint, Grand Rapids, Saginaw and Pontiac, the sources said.

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Obama, not keen to set a precedent of the federal government sending money to cities or states with deep pension debts, has publicly said there’s no support for a bailout of bankrupt Detroit.

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Snyder already has pledged the state’s support to send $350 million to the city as part of the grand bargain to help rescue the Detroit Institute of Arts and bail out the pension funds.

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