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Updates in Detroit Mediation Case

Wednesday, November, 20, 2013


The federal bankruptcy judge responsible for mediating Detroit’s bankruptcy has recommended that nine nonprofit foundations set up a fund to support the city’s art and pension funds.  Gerald Rosen, who is also the chief district judge for the Eastern District of Michigan, recommended this several weeks ago in a mediation session.  He also recommended that the fund come up with $500 million in order to support these efforts. 


Others, like creditors, have recommended that Detroit, instead, sell its assets.  These assets would include artworks that Rosen wants the city to protect, if at all possible.  Currently, an auction house is considering the value of the Detroit Institute of the Arts 66,000 piece collection.  Although confidential mediation sessions started as early as September, many have objected to the bankruptcy in the first place.  These objectors include unions, retirees, and supporters of the pension funds that are in question at the moment. 


This is coming at the same time that U.S.  Bankruptcy Judge Steve Rhodes is considering the eligibility of the city for the bankruptcy process.  The city claims that their current liabilities in the pension fund total more than $3.5 billion, and the city is exploring ways to remedy the pension fund (such as reducing pension benefits) so that the program is more viable long term.  Some argue that Michigan’s constitution doesn’t allow for cuts in the existing pension program, although it appears that some serious changes would need to be made in order for the program to continue supporting retirees.  Currently, the prospect of selling the art collection has not been ruled out by city officials, who are hopeful that they will find a way to make money in the midst of bankruptcy.