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  1. #1
    Senior Member JohnDoe2's Avatar
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    Aug 2008
    PARADISE (San Diego)

    JP Morgan Chase to give Detroit a $100 million hand up

    JP Morgan Chase to give Detroit a $100 million hand up

    John Gallagher, Detroit Free Press 1:38 p.m. EDT May 21, 2014

    (Photo: J. Scott Applewhite AP)

    DETROIT — When the head of the world's largest bank called the local billionaire bent on Detroit's revival, good things happened.

    JP Morgan Chase CEO Jamie Dimon is in Detroit on Wednesday to announce a $100 million investment in the city that began several months ago with a phone call to billionaire Dan Gilbert, the Quicken Loans founder who owns or controls more than 40 downtown buildings.

    "Obviously, Detroit was having issues," Dimon told the Free Press this week in an exclusive interview. "I got together some of our senior people and said, 'What can we do that's really neat, that could be really creative?' "

    Two of the most powerful men in American business and finance developed a relationship in recent years as their interests intertwined.

    So when Detroit slid into Chapter 9 bankruptcy last year, Dimon wanted to act and sought Gilbert's advice.

    "We pointed him and his people to various relationships or others that we knew about here in Detroit," Gilbert told the Free Press this week.

    "They called back and said, 'Here's what we're doing, and we're pretty excited about it.' "

    Over the coming five years, the $100 million will speed up the city's blight-removal efforts, strengthen workforce development, pump money into urban redevelopment projects, train entrepreneurs and provide rehab loans to homeowners. The money will flow to groups already active in the city, including the M-1 Rail streetcar project, Eastern Market, Focus: HOPE and a variety of workforce training and entrepreneurship programs.

    "No one's forcing them to do this by any means," Gilbert said. "I think they're doing it because they think Detroit's not only in need of help in a lot of areas, but they believe in the long-term growth and they want to be involved in the ground level. So I think it's very, very important and very exciting."

    Quicken Loans chairman and founder Dan Gilbert plans to participate in a $100 million investment in the city of Detroit(Photo: Provided to Detroit Free Press)

    The bank is hoping to make money off the deal from loan interest, but mainly by helping revitalize one of its major markets, where it has 1 million regional customers, 2,500 employees and a lot of history as the successor company to the old National Bank of Detroit. The positive public relations of helping Detroit, with its auto industry nearly felled by the Great Recession, is also a benefit for the major financial player.

    "When you're in a town, you try to be a great citizen there," Dimon said, "and we happen to be a big player in Detroit."

    Commitment hailed

    That first phone call led to secret discussions involving Gov. Rick Snyder, Mayor Mike Duggan, and many others. Today, Dimon will attend a celebratory lunch with Duggan and Snyder to announce Chase's commitment.

    Snyder hailed the commitment this week, calling it "very exciting."

    "I think it really helps and it sends a great message that people see significant value in investing in Detroit and that there's a lot of upsides," he said. "As a result of the bankruptcy, Detroit hopefully will be viewed as one of the great value places to invest, a place that has a future in terms of living and working there."

    Snyder added that Chase's commitment this week might help nudge Lansing lawmakers to vote on the rescue plan for Detroit. That plan would see the state commit the equivalent of $350 million over 20 years toward a grand bargain to shore up Detroit pensions and protect artwork at the Detroit Institute for Arts from sale. It is currently being debated in the Legislature.

    "I view it as a very positive statement to make," Snyder said of the Chase pledge, "that private organizations are seeing value in Detroit and really want also to help this equation. So hopefully that will be further encouragement for legislators to vote to support the package."

    Dimon said Detroit's bankruptcy probably won't have a lasting effect on Michigan's borrowing costs or the municipal bond industry, even as bondholders cry foul about the city's proposed debt cuts.

    Dimon also said Wednesday that he's "very sympathetic to people who have pensions of $20,000 a year" in Detroit.

    The average Detroit civilian retiree pension is about $19,000.

    "I personally think they should be protected," Dimon told the Free Press editorial board.

    Dimon said he's "not an expert" on Detroit's bankruptcy, but "bondholders know they take a risk when they lend money."

    Key to revitalization

    Dave Blaszkiewicz, president of the civic group Downtown Detroit Partnership and head of the Invest Detroit fund for local development projects, said the Chase investments will be key in advancing Detroit's revitalization efforts.

    "You couldn't ask for a better time to bring these dollars in," he said.

    For Chase itself, the benefit comes from fostering the economic climate in one of their key markets, said Peter Scher, Chase's executive vice president of corporate responsibility.

    "We feel like we have been and will be a part of the community of Detroit for the long term," he said. "The thing that drives this for us is both a sense of responsibility and also a sense that we want to be in Detroit for the long term and so we have an interest in seeing Detroit succeed."

    "We essentially spent the last six months trying to determine where there are areas where we would be uniquely positioned to make a difference, to help accelerate some of the efforts that are already going on," Scher said. "What's in it for Chase is the long-term success of Detroit. If it's good for the economy, it's good for our business.

    Chase also is concerned with finding solutions for all the other cities around the world where it does business in some 60 nations.

    "So to the extent that we can begin to find solutions in a place like Detroit, our hope is that those solutions will be applicable in other places around the country and frankly around the world."


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  2. #2
    Senior Member JohnDoe2's Avatar
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    Aug 2008
    PARADISE (San Diego)
    Michigan House approves $195 million for Detroit 'grand bargain' bankruptcy deal

    Downtown Detroit as seen from the roof of the Broderick Tower. (Jonathan Oosting |

    By Jonathan Oosting |
    May 22, 2014 at 3:57 PM, updated May 22, 2014 at 6:30 PM


    LANSING, MI -- The Michigan House on Thursday approved sweeping legislation that would send $194.8 million to Detroit in a bid to minimize pension cuts for retirees and help end the largest municipal bankruptcy case in United States history.

    The 11-bill package, now headed to the Senate for consideration, would consummate a "grand bargain" brokered by bankruptcy mediators and require long-term financial oversight for the city, which has racked up massive debt.

    Philanthropic foundations and the Detroit Institute of Arts have pledged $366 million for the grand bargain in order to protect prized art from a potential fire sale, and two union groups this week agreed to make or facilitate "material contributions" for retiree health care.

    "Detroit has attracted people like my grandparents and my father, and it has kept people like me here for 313 years," said House Speaker Pro Tem John Walsh (R-Livonia), who spearheaded the legislation and shared his family story on the floor. "It's my belief that if we pass this package and reach a settlement, we can get Detroit back on a path to attract millions more and thousands of businesses."

    House voting varied from bill to bill. The most significant legislation -- proposals to withdraw $194.8 million from the state's "rainy day fund" and create a 9-member financial oversight commission -- passed in 75-35 and 103-7 bipartisan votes, respectively.

    The House broke out into applause after voting concluded.

    State Rep. Al Pscholka (R-Stevensville), author of a controversial emergency manager law, said Detroiters have called him "many things" and noted that there are more Bears than Lions fans in his district. Still, he argued, a settlement with pensioners would help the state avoid decades of legal costs and social welfare spending.

    "Choosing to do nothing means putting billions of dollars of debt and uncertainty on our kids and grandkids," Pscholka said. "Michigan and Southwest Michigan are in a stronger position by settling this matter and settling this bankruptcy."

    State Rep. Harvey Santana (D-Detroit), delivered a spirited floor speech in support of the package, his city and leadership from both sides of the aisle. "Detroit is a place, not a problem," he said. "…Do you really want to open up the gates of financial armageddon and see what's on the other side?"

    Only one bill -- a proposal to prohibit the DIA from seeking renewal of a 10-year operating millage after the city-owned museum transitions to a charitable trust -- proved especially controversial. Democrats said the legislation was "outside the scope" of the grand bargain and argued it would disenfranchise voters in Wayne, Macomb and Oakland counties who chose to approve the millage in 2012.

    "The core of this bill is taking away the rights of voters to decide whether they want to pay a millage or not," said state Rep. Sarah Roberts (D-St. Clair Shores), calling it a "slap in the face" to DIA benefactors who raised funds for the grand bargain. Only six Democrats voted for the bill, which passed in a 66-44 vote.


    Michigan Gov. Rick Snyder has pushed for state funding and originally proposed sending Detroit pensions $350 million over 20 years. The House package includes a smaller lump-sum payment, as requested by pension leaders, to be repaid with tobacco settlement dollars over two decades.

    Even with the grand bargain, general retirees would face a 4.5 percent cut in their monthly pension checks and lose all cost-of-living adjustments going forward. Police and Fire -- who don't typically qualify for Social Security -- would not see pension cuts but would see cost-of-living increases scaled back by 55 percent.

    Detroit Emergency Manager Kevyn Orr, testifying in committee last week, suggested a general retiree now earning a $20,000 pension would make upwards of $24,000 by 2023 under the current system.

    With the grand bargain, they'd make $17,300 a year in perpetuity.

    Without it, they'd make $13,000, just north of the federal poverty line for a single-person household.

    Detroit creditors -- including retirees and bondholders -- have already received ballots and are expected to vote on the city's latest debt adjustment plan by July 11. The plan would then have to be approved by U.S. Bankruptcy Judge Steven Rhodes over objections from various groups.

    State Rep. Phil Cavanagh (D-Redford), the son of former Detroit Mayor Jerome Cavanagh and a candidate for Wayne County executive, said approving the settlement package would protect retirees from even steeper cuts and give them confidence as they prepare to vote on a plan of adjustment that anticipates the grand bargain.

    "These bills give certainty that people can carry on with their lives, fix their budgets and won't have to go through years and years of litigation," Cavanagh said. "That's important."


    In addition to the money, the House package approved Thursday would attach several "strings" to the state's financial contribution, provisions designed to win over skeptical lawmakers and protect taxpayer investment in Detroit.

    A financial oversight commission modeled after a similar board in New York City would have broad authority to review and approve city contracts, collective bargaining agreements and budgets. The commission could go dormant if the city meets certain financial goals over a three-year period and could be dissolved if it is dormant for 10 straight years.

    The governor, treasurer, director of the budget department, house speaker, senate majority leader, mayor and Detroit council would help select commission members. The city would be required to employ a chief financial officer (which it currently does), who would report relevant information to the commission.

    State Rep. David Nathan (D-Detroit) was the only lawmaker to speak out against the package on the House floor, suggesting the oversight commission "could go on forever" and would represent a "takeover" of his city.

    "I do not trust this will work out for the betterment of my community," he said.

    An earlier draft of the legislation would have required Detroit to phase out its traditional pension system, moving new hires to a 401k-style defined-contribution plan. A committee amendment removed that requirement but would limit the city from contributing more than 7 percent base pay to "an appropriate retirement account" for new employees, beginning in July of 2023.

    Both of the city's major pension systems would be required to create an investment committee to recommend and potentially overrule management decisions by the board of trustees, who would also face travel restrictions.

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