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Policy: Entitlements

Orr: $1 billion Detroit bankruptcy deal at risk

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Photo - Detroit emergency manager Kevyn Orr speaks with reporters after addressing the Mackinac Policy Conference on Friday, May 30, 2014 on Mackinac Island, Mich. Orr said city retirees and workers considering a deal to cut their pensions risk much steeper reductions if they make a "protest vote" over a restructuring plan to help Detroit out of bankruptcy. (AP Photo/David Eggert)
Detroit emergency manager Kevyn Orr speaks with reporters after addressing the Mackinac Policy Conference on Friday, May 30, 2014 on Mackinac Island, Mich. Orr said city retirees and workers considering a deal to cut their pensions risk much steeper reductions if they make a "protest vote" over a restructuring plan to help Detroit out of bankruptcy. (AP Photo/David Eggert)
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MACKINAC ISLAND, Mich. (AP) — Detroit's emergency manager warned Friday that a complex package of nearly $1 billion in possible aid for the bankrupt city could unravel unless city employees and retirees approve a pension deal.

Kevyn Orr said $195 million in upfront state money still has to be approved by state senators — possibly next week — and he worries city workers and retirees voting on a related deal to cut their pensions by up to 4.5 percent will make a "protest vote" or be influenced by creditors such as bond insurers trying to undermine the agreement with "misinformation."

The state funds, the equivalent of $350 million spread over 20 years, would be joined with $466 million in commitments from 12 foundations and the Detroit Institute of Arts to shore up the city's two retirement systems while the city-owned art museum and its assets would be transferred to a private nonprofit. Roughly 30,000 retirees and city employees are in the midst of a 2-monthlong vote on the pension and art deal.

"Please, be careful. ... We have $816 million we did not have a year ago, almost $1 billion coming across the transom. If you vote no and that money goes away, we are talking about severe cuts," Orr said during a speech at the Mackinac Policy Conference, the Detroit Regional Chamber's annual meeting for more than 1,500 business, political and civic leaders.

The crux of his proposed restructuring plan is a collection of settlements among stakeholders and creditors, he said. The agreements would disappear if the outside money does not come through.

"I'd ask you, those of you who have an opportunity to speak on this issue, to talk with them, to please explain to them: 'This is not a game. This is not a time for protest votes. This is very serious business that could result in people getting pushed to the poverty rolls and people unfortunately experiencing a much reduced quality of life and ability to survive for some people.'"

Bond insurers have pointed to the art collection — which includes Van Gogh's "Self Portrait" — as a possible billion-dollar source of cash in the 10-month-old bankruptcy case. But Orr said if the city made $2 billion to $4 billion selling art, the proceeds would be spread among all creditors holding $12 billion in unsecured debt — a worse deal for pensioners, he said.

Orr also warned that no one should take a pending summer trial on Detroit's plan to emerge from bankruptcy for granted.

"It is going to be a running gun battle, but we'll get through it," he said.

Orr was appointed by the state to lead the city in March 2013. He and Gov. Rick Snyder decided to file the largest-ever U.S. municipal bankruptcy last July, and Orr's appointment ends in September.

Early ballots from city workers and retired workers show they are supporting the plan at about 2 to 1, Orr told reporters.

"I think a lot of people are waiting until they see if the Senate funding comes in so the whole $816 million is there and I think we'll see voting. I just want to make sure they have accurate information," he said.

The $195 million bankruptcy legislation won bipartisan approval in the Republican-led House last week and is up for consideration in the GOP-controlled Senate before the Legislature breaks for the summer on June 12. Oakland County Executive L. Brooks Patterson has been lobbying suburban Detroit senators over his concerns about the bankruptcy exit plan's call for regionalizing Detroit's water department.

Snyder said Friday that the water issue should not be tied to the art and pension rescue, and could be settled outside of the bankruptcy case, an argument Detroit Mayor Mike Duggan has made as well.

"I don't think it should be a sticking point to getting the grand bargain (legislation) done. We should get the grand bargain done," Snyder said.

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Follow David Eggert on Twitter at https://twitter.com/DavidEggert00

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