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Koch brothers' group tries to derail Detroit bankruptcy deal

Lester Graham
Michigan Radio
Detroit's skyline.

Michigan lawmakers are debating a $200 million aid package for Detroit as the city moves through bankruptcy. Until now, state lawmakers haven’t been willing to help it with anything that could be called a “bailout.”

While Governor Rick Snyder supports the current deal, many of his fellow Republicans appear to be balking, especially after a threat of political retribution from the Koch Brothers political network.

Detroit officials have been doing lots of talking in Lansing for the past week, lobbying hard for the state aid package.

Kevyn Orr, Detroit's state-appointed emergency manager, and the bankruptcy lawyer in charge of Detroit's historic case, told lawmakers that the city has a reasonable plan to resolve its issues and avoid a long, complicated court battle.

But he says that without state funds, that could easily unravel.

“To put it bluntly, we need your money,” Orr said. 

This isn't your usual aid package, though. It's a bit more complicated.

Together, the state and a group of foundations would come up with over $800 million.

Not coincidentally, that's the same value that Christie's auction house has put on the Detroit Institute of Arts' world-class collection.

The money would backstop the city's underfunded pensions and spare Detroit retirees the kind of severe cuts Orr had threatened.

And then, in theory at least, those retirees would approve Orr's controversial restructuring plan, sparing the museum from a potential fire sale.

That deal is dubbed the “grand bargain,” and not surprisingly, it has its critics.

Some of Detroit's creditors insist the museum's assets are worth much more than $800 million and argue that the city should be forced to sell at least some pieces to pay them off.

And then there are the political critics.

"They're in bankruptcy. They need to sell those assets first, to provide for their retirees, before looking for a handout," said Hagerstrom.

State Sen. Mike Kowall, R-White Lake , says people from outside Detroit feel that it's not their responsibility.

“They didn't do it. People from the near suburbs are, you know, irritated and resentful of the fact that they have to bail Detroit out. So, there's still a lot of hard feelings,” Kowall said.

Some Republican lawmakers in Michigan still see giving Detroit any kind of help to be political poison.

And now, the Michigan chapter of an influential conservative group is warning those Republicans that a “yes” vote will have consequences.

Americans for Prosperity is the national political action network backed by industrialist billionaire brothers Charles and David Koch.

Scott Hagerstrom directs the group's Michigan chapter and says Michigan has given Detroit too much of its money for decades.

“And it hasn't worked. It's enabled bad behavior, and it needs to stop,” he said.

Hagerstrom argues that Michigan taxpayers shouldn't support the grand bargain when Detroit is sitting on an estimated $3 billion in city assets, including its art museum.

“They're in bankruptcy. They need to sell those assets first, to provide for their retirees, before looking for a handout,” said Hagerstrom.

Hagerstrom says Americans for Prosperity will tap its deep pockets and activist network to get Republicans this message, if you vote for the grand bargain, we'll make your life difficult in the next election.

But despite that, it's not clear that Michigan voters outside Detroit hate the grand bargain.

A poll recently commissioned in part by Michigan Radio found that nearly half those voters support helping Detroit.

And when they learn that money will go to help city pensioners and protect the museum, support swells to a sizeable majority - even among Republican voters.

Bernie Porn is with EPIC MRA, the firm that conducted the poll.

“This is not going to in any way, shape or form negatively impact legislators running for reelection,” he said.

Both the deal's supporters and opponents have little time to pressure lawmakers, though.

Legislators began holding votes on the grand bargain this week.

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.
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