Ford School faculty member Gretchen Whitmer opens her class to the community & welcomes special guests Judge Steven W. Rhodes, Judge Gerald E. Rosen, Judge Mike Gadola, Sen. Randy Richardville, Chad Livengood, & Rep. Tommy Stallworth. October, 2015.
>> Good afternoon, everybody. Welcome. It's great to have all of you here with us this afternoon. I'm Susan Collins, the Joan and Sanford Weill Dean here at the Gerald R. Ford School of Public Policy, and really excited about this very special event. This event is being led by one of the Ford School's very dynamic research centers, CLOSUP, which is the Center for Local, State and Urban Policy. And so on behalf of CLOSUP and the Ford School it's great to welcome all of you here. It really is going to be a great conversation. I'd like to recognize a special member of the University communities. Cynthia Wilbanks is with us and she is the Vice President for Government Relations. Thanks for joining us. Great to have you here. [ Applause ] Well, our Panel for tonight represents a really distinguished group of experts - Judge Rhodes, Judge Rosen, Judge Godola, Senator Richardville, Representative Stallworth, and Mr. Chad Livengood from the Detroit News. Some of our guests are held up in traffic and will be joining us shortly, but we thought that we would just launch right in because there's a lot to talk about and I know that you all have been eager to have us get started. So you'll find bios in the program. I'm not going to go into extensive detail and I know that our host will speak in just a little bit more length about the critical roles that each of them played in the events that led up to the grand bargain. So, for now, I will simply say that it really is a terrific honor to have each of you here with us and to be hosting you for this event. Welcome. So I suspect that there are no more than a handful of people in the state who could have picked up the phone and on very short notice put together such a really impressive group of experts. And so I'm really delighted to introduce the woman who did just that, someone with a very long track record of bringing people together, and that is our very own Professor of Practice, Gretchen Whitmer. We're delighted to have you here as part of our faculty. Gretchen is a former member of the Michigan Senate, representing the State's 23rd District from 2006 until 2014. In 2010 her colleagues chose her to be the Senate Democratic leader, making her the first woman to lead a caucus in the Michigan Senate. She previously served in the Michigan House of Representatives and is an Attorney specializing in regulatory and administrative litigation. And although she has not one, but two degrees from a nearby Big 10 institution, whose name will not be mentioned, at least for a little while in these parts, I can say without a doubt that we consider Gretchen to be a true champion for Michigan. That is very easy to say. So this file, as I already alluded to, Gretchen joined the Ford School's faculty as a Towsley Foundation maker in residence, and a very generous gift from the Towsley Foundation has for 13 years helped us to enhance our curriculum and strengthen our ties to policy communities. Like Gretchen, all of our Towsley visitors have significant local, national and, or international policymaking experience as leaders. They teach courses, mentor students, work with faculty, and really become members of our community during their time with us. Gretchen's course this semester is for undergraduates and it's called Running, Serving and Leading in a Legislative Body. The class gives students a practical understanding of what it takes to run for office, to serve as an office holder, and what leadership means amongst leaders. In fact, today's event is really a special session of that class, giving all of you a glimpse into the engagement opportunities that she provides for our students. Thank you for all that you've done for our community and, again, we're delighted to have you as part of this event. So just a word about the format for today's event. Because it's part of a class we're going to end around six p.m. instead of the usual five-thirty close. Gretchen will introduce our panelists and then launch the panel discussion. Each panelist will offer some remarks and then participate in the question-and-answer session that will be moderated by Gretchen, then we'll have an opportunity to take questions from the audience. So beginning at about five p.m. our staff will start collecting question cards. You should have received those as you came in. CLOSUP's Program Manager, Tom Ivacko, together with two Ford School students, two BA students, Connor Ruben [Assumed Spelling] and Elizabeth Oliva [Assumed Spelling], will facilitate the question-and-answer session. And for those of you who are watching online please tweet your questions to us and use the hashtag policy talks. With no further ado, it is my pleasure to turn the floor over to Gretchen Whitmer. [ Applause ] >> Well, thank you. It is a privilege to be here and it is a privilege to teach at the University of Michigan, and I tell all my Spartan friends and all my East Lansing neighbors how much I love the University of Michigan, and I am proud to be affiliated with this University and certainly Dean Collins with the Ford School. The quality of students, the caliber of the professionalism, it's just really an honor. So, with that, we will jump right into the program. When I put this class together, Running, Serving and Leading in a Legislative Body, really my personal goal was to try to inspire some of these young brilliant minds to think about the chance maybe someday they'll run for office and be leaders. And so I'm looking at future leaders and I've got a panel of amazing current leaders, who really took our state through one of the toughest things we've ever faced as a state and did so in a beautiful manner. And it's something that really was difficult and could have led to so many landmines along the way, to navigate that with the leadership of Judge Rhodes and Judge Rosen, but also Mike Godola, who is now Judge Godola, but he was with the Governor's Office as Legal Counsel during the time of the grand bargain. Senator Richardville was the Majority Leader in the State Senate, so he was my counterpart. Unfortunately, I was the Minority leader. Chad Livengood, who is enroute, but apparently there was some traffic in Brighton - am I right, Judge Godola, that was the hold-up? >> It took two hours to get here from Lansing. >> Wow. >> It wasn't even game week. That's right. [laughter] >> And Representative Tommy Stallworth, who is a Detroiter, Democrat from the House, and I thought that this was a really great opportunity to learn from the experts, talking about all of the different things that they had to confront when trying to solve this problem. Now there are a lot of reasons that led to the problem, and I don't know that we're going to have any time to delve into that and I don't know that everyone could agree on what all of those reasons were. But I think what everyone at this table can agree on is that Detroit had massive financial debt and that it took a real act of courage on a Governor's part, a Governor with whom I didn't always agree, but I admire the fact that it took a real act of courage to start this process. And I am grateful that I played a small role in this, but the role was actually played by Judge Rhodes and his leadership overseeing the whole thing. Now as I think about how high the stakes were for so many people and all of the different interests that were involved I was kind of going through who did the city owe money to? Retirees, bondholders, creditors. What assets did it have? Well, we know it had the Detroit Institute of Arts and the amazing world-renowned art collection. Who else was a part of the solution that came to be was nonprofit foundations, retirees and pensioners, current employees of the City of Detroit. Think about the different players we had. Emergency management and a newly elected Mayor, and all of the potential landmines that could have happened with that. And then the politics, right? The Judiciary, the Executive and the Legislative Branches were all involved. Republicans and Democrats, Metropolitan Detroiters and out-staters. We had State, county and municipal levels of government, as well as the public sector and the private foundation sector. This was an incredible thing that happened in Detroit, and with that introduction I simply would like to start the beginning portion of this discussion and Judge Rhodes has graciously agreed to start. I will jump in, so to keep things moving if necessary, but with that, Judge Rhodes, thank you so much for joining us and I'll turn it to you. >> Well, thank you for having me. So what I'm going to talk about is really three things and briefly. The first is what were the city's debt obligations when it filed bankruptcy on July 18th, 2013, and then I want to talk about what the mood in the city was that I was faced with. And then I want to talk a little bit about how I reacted to the grand bargain, itself. So the debts, there was $18 billion of debt that the city owed when it filed bankruptcy. The largest portion of that debt was probably secured debt of the Water Department. But the second largest was probably what we came to call OPEB, other post-employment benefits, which consisted of the city's obligation to pay for the healthcare of its retirees, and that debt was calculated to be about $5 billion and it was largely unfunded. The next largest debt was probably the debt that the city owed to its two pension plans, totaling about $3.5 billion, although I came to learn later in the case that that obligation could quite reasonably be calculated much, much higher than that. The next largest debt was probably the city's unsecured general obligation bond debt, some of it was what we came to call unlimited general obligation bonds, unlimited taxed general obligation bonds, and then limited tax general obligation bonds. Those added up to somewhere between $500 million and a billion dollars. And then there were the general unsecured creditors, trade creditors, tort claim creditors and the like. So that was the financial lineup when the city filed. Now of greatest concern to me when the city filed was actually not its debt. I assumed that one way or another that would get worked out through the bankruptcy process. That's what we do day in and day out in bankruptcy, and I was confident that the process would come to some kind of a result on the debt. What really concerned me was the anger of the people in the city. They were extremely angry and they were angry at really two distinct things. First, they were angry at the appointment of an emergency manager because to many of them that emergency manager had unlawfully, improperly, even unconstitutionally displaced their duly elected government and they didn't like that, they were angry and they were protesting about that. And then they also didn't like the fact that the city had been thrown into a bankruptcy case by this unelected emergency manager and they were very upset about that and so there were demonstrations in the streets. And so throughout the case it was my challenge as the judge overseeing this process to try to convince the skeptical and cynical and unhappy people in the city that I was going to be a fair and impartial arbiter of the law and the facts and the procedure in the case, and I worked on that constantly throughout the case. Third, regarding the grand bargain, as you'll hear it was the first settlement by creditors in the case. I felt a wonderful combination of gratitude and awe about it. Gratitude because I knew that it would make my job as the judge in the case easier, indeed, much easier. Now it wasn't going to make my job easy, but it was going to make it easier. And I was in awe at the accomplishment of it. It was, as you'll hear how it came to be, truly a miracle. It was unprecedented in the history of mediation and it was unprecedented in the history of bankruptcy. It was unprecedented in the history of mediation because the mediator's job is to resolve disputes between parties, but here Judge Rosen and his team did much more than that, they went out, outside of their roles as mediators, and brought money to the table to help solve the problem. So that was unprecedented in mediation and it is certainly unprecedented in a bankruptcy for parties' problems to be solved by gift money from the outside from any source, that's just unheard of. So I was overwhelmed with the sense of gratitude and awe at what Judge Rosen and the Governor and the people in the Legislature and the Foundations and the DIA, itself, were able to come together and do here to solve this problem. >> Thanks. First, Gretchen, thanks, appreciate it. It's good to have the gang back together again. When Gretchen calls we all come. And, Dean, thank you for having us. I thought I will pick up where Steve left off and talk a little bit about the grand bargain. I'm sure we'll get into that a little later. But I want to start off by talking about the other side of the financial picture because in addition to the crushing financial obligations that the city had, which as Steve so well identified, there were human costs. Beneath the staggering $18 billion in total debt and the subparts that Steve talked about were the human costs of these debts, so I thought I would talk about it just at the outset. Detroit was what municipal bankruptcy experts call service delivery insolvent, which is kind of an anticepture [Assumed Spelling] which means that for the city's residents, businesses, visitors, the city really isn't a city, at all. It has no services that it is effectively delivering to the people who live in and come to the city. So I thought I would talk about some of those aspects. Basic public safety services, such as police, firefighting, and emergency medical services varied between sporadic and nonexistent. For example, response time for police was running at close to an hour. The national average is 11 minutes. There were 12,000 fires a year in Detroit, many of them went unanswered. Forty percent of the city's 90,000 streetlights were out and the copper wire innards that would have been necessary to repair them had fallen victim to scavengers, all of which left the city's streets darkened and, of course, criminals thrived in the darkened streets. Large areas of the sprawling 140-square-mile city, which just to think about Detroit in terms of its geographic size, it's the size of Boston, San Francisco and Manhattan combined. In most areas of the city garbage collection and snow removal, you know, basic city services that you need, were haphazard and unreliable and often nonexistent. Let's talk about the city's neighborhoods. The city's once vibrant neighborhoods that had once housed almost two million people had decreased to fewer than 700,000 people, and these neighborhoods had 150,000, almost 150,000 blighted homes and vacant lots, many of course and unfortunately now hosting crack houses, prostitutes and squatters and other sort of criminal elements. The city's water and sewer system, the Detroit, once the vaunted [Assumed Spelling] Detroit water and sewer, just once the sort of the best in the nation, was springing leaks and floods and it was collapsing with regularity. And, as Steve mentioned, the debt, the $6 billion bond debt for the DWSD gave little hope for infrastructure refinancing. I could go on and on and on about the state of the city. At the time of the bankruptcy filing the city had less than eight weeks of operating cash. Steve mentioned that the pension underfunding was at $3.5 billion. The city wasn't even making its contributions to the pensions, the city had stopped making its contribution to the pensions and the retirees who had given their working lives to the city. You know, this debt had real human costs, and I'm very happy that the Governor recognized that because - and I don't mean this in any kind of partisan way because I put this on the Governors' - plural - that succeeded him, that preceded him rather over decades had kicked the can down the road and tried to apply Band-Aids or avoided the problem all together. And nothing was getting better, noting was getting better. Detroit was devolving, continuing to lose population. Young people, like yourselves, were leaving the city and not coming back. There was really no hope for the city. And this is how we found it. And, for me, there was one other critical factor that I didn't realize when I first accepted the assignment from my friend, Steve, which is a whole different story, but I realized it as I started reading and read Kevyn Orr's proposal for creditors, which was really a history of the city's financial and operational decline. And in it I found that there was really no assets to pay creditors. This was truly an asset less bankruptcy and, for me, that was devastating to find because my job was to get settlements with creditors, between the city and the creditors, and to get settlements you've got to have money or at least assets that you can convert to money. Indeed, the city had only one real readily liquidatable asset, which was its iconic art collection owned and housed by the Detroit Institute of Arts. It was a world-renowned collection of virtually every major and many, many sort of niche artists in the world, and every creditor wanted to monetize it and liquidate the museum for the benefit of the creditors, which I thought would be devastating to not just the city but the region and the state on virtually every level you could imagine. So when I first began thinking about how to - the bankruptcy as a paradigm and how to approach settlement it became obvious to me that the bankruptcy was sort of bookended by on the one hand the art and all of the cultural and legal issues, there were a lot of legal issues surrounding it, and sort of the future leaning issues, what would Detroit look like, what would Midtown look like, which was the fastest growing area of Detroit, what would Midtown look like if we liquidated the art museum. It drew 600,000, more than 600,000 people a year to Midtown. If we liquidated it I thought it would be like dropping a bomb in the middle of Midtown, it would just - a hydrogen bomb, would just suck the life out of Midtown. And even more than that it would have created a civil war in the region because the folks who supported the DIA, which were the three counties that had just the year before voted a milledge [Assumed Spelling]. They weren't going to just stop and say, okay, fine, liquidate the art. The Board of Trustees of the DIA was literally a Who's Who of the entire region of Detroit and they were raising a war chest to fight liquidation. So it would have sparked a war. So on the one hand of the bookend there was the art, on the other hand were the retirees and their pensions. These are 23,000 people who had given their working lives - police officers, firefighters, emergency medical people, all the civilian employees, who had given so much to the city and had promises made to them. Hey, Tommy. Here's a hero. >> Tommy likes to make an entrance. [laughter] >> Who had given so much to the city, and there were legal issues that surrounded this that would have taken years, maybe decades to resolve to take up to the Supreme Court. And what would have been left of Detroit while all of these many legal issues were resolved? Detroit would have continued to devolve, the population would have continued to decline, revenues would have continued to decline. And the very first time Steve and I talked about this, the very first time, we agreed on a lot of things and one thing we agreed on for sure was time was the enemy, nothing was going to get better with time. So not only did I have to try to get deals together, we had to do it quickly, we had to do it quickly. I could go on and on, but give a chance to everybody else. >> No, that's fantastic. So we've had the kind of perspective from the judiciary and now we've got to legislators, but first we're going to go to the Executive Branch because Mike worked with Governor Snyder at the time and curious how the Governor, how this worked in the Executive Branch. I never quite knew. >> You were invited to the meeting. [laughter] >> Only when you needed my vote. >> No, now, it never ends, does it? [laughter] I'm not sure I knew everything that went on, even though I was there and intimately involved in this rather miraculous process. I was the Governor's Legal Counsel for four years. I'm now privileged to be a member of the Michigan Court of Appeals. I'm not the Governor's Lawyer any longer, but I'm going to put in a brief for him this afternoon with all of you. Judge Rosen frequently refers to heroes of the bankruptcy, and I'm sitting among them. I'm not one of them, but ... >> Yes, he is. >> ... the people to my right and my left are and that includes Gretchen who understated her very key role in this, as well. She belongs on this panel with us, really. But I think Governor Rick Snyder has to be thought of as first among equals as far as heroes of the bankruptcy are concerned because, frankly, none of us would be sitting here in front of you today talking about this if not for his laser focus on Detroit and its finances and bringing the city back to life. Gretchen used the term courage, and I had that very word here in my notes. It took incredible courage I think for the Governor to do all the things he did really from 2011 moving forward. The Governor has a couple of phrases associated with him - relentless positive action, one tough nerd, which was a campaign slogan from 2010. It certainly took relentlessness and toughness to get this done from the administration standpoint, and this does date back to 2011 with the passage of then Public Act 4, which was the first ideation of the revised Emergency Manager Law. It was subjected to a referendum in 2012 and defeated at the polls. The Governor, undeterred, spearheaded the passage of PA436, which was a modified version of the predecessor statute. And the members of the Legislature demonstrated great courage in the face of that referendum vote in November and passing PA436 in December. The Governor during that time declared a financial emergency in the City of Detroit, had the wisdom and very good fortune to identify Kevyn Orr and convince him to take on the Herculean task of being the Emergency Manager for the City of Detroit. He then authorized the city to file for bankruptcy in July of 2013. Now mind you what this meant was the Governor was putting, essentially putting, it was Kevyn Orr who made the filing, but the Governor was essentially putting the state's largest city into bankruptcy about 15 months before his reelection. So that was an act of tremendous political courage on his part. And then the two gentlemen sitting to my right, Judges Rosen and Rhodes, are huge heroes in this process. The Governor expressed a desire to have this case concluded within one year, which was thought laughable at the time and certainly laughable by bankruptcy judges and bankruptcy lawyers that you could get a case of this magnitude, and it was, it dwarfed any other municipal bankruptcy in the country at the time. >> Can I just interject? >> Yes. >> And put this in perspective - at the time Detroit filed bankruptcy every other municipality that was in bankruptcy was still in bankruptcy at the time we - Steve confirmed the plan. >> Right. >> So this was really - we got through this in warp speed. >> Yes, absolutely, and that is owing to their heroic efforts. Judge Rosen miraculously coming up with $350 million initially and $366 million worth of foundation funding in the end, and then $100 million from the DIA funders to support the grand bargain. And Judge Rhodes, very calmly and deliberately, working this case through to conclusion in 15 months, which is absolutely unbelievable. And I will just say that Judge Rhodes is the model of what you would want in a trial judge, calm, deliberate, very smart. The same goes for Judge Rosen, as well. So I got to, as part of this, watch my client, the Governor, give a deposition and testify at an eligibility trial. These aren't things that you look forward to. [laughter] As the Governor's Legal Counsel it's been said, and I think it's true, it's the first time a sitting Governor has testified at a trial. We tried to prevent that from occurring, but Judge Rhodes wasn't very impressed with our arguments. [laughter] That is putting it mildly. >> Well, but he turned out to be a pretty good witness. >> He was, I will concur. I was proud of him as his lawyer. So that's sort of the macro view of the bankruptcy. >> He does have a Michigan law degree, Mike. >> Yes, he does. [laughter] And he's very proud of it. The grand bargain, Judge Rhodes in his confirmation opinion described it as the cornerstone of the city's plan of adjustment. And Judge Rosen, as I mentioned, somehow managed to line-up these foundation commitments and then challenge the Governor, I'll put it that way, to match it. So $350 million, we need you now, State of Michigan, to come up with your own $350 million and we'll get the DIA to kick in $100 million. >> And Mike was in that meeting. >> Yes, I was, and we couldn't quite believe that he'd managed to do it. [laughter] And so, in fact, I remember one of the first meetings I attended in Judge Rosen's chambers in connection with the mediation, and this is before the grand bargain had developed. I think it was just sort of a kernel of a thought in his mind at the time and ... >> It was a sketch on the cardboard backing of a legal pad. >> ... he looked at me and said, you know, the state, Mike, the state is going to have to come to the table with some money to make this work. The state is just going to have to do this. And I looked at him and I said, Judge, I don't know if you've heard about this, but we have this thing in Lansing now called the Tea Party. [laughter] And Senator Richardville can tell you a little bit more about that. I said I don't see how we're going to be able to do this. But we accepted the challenge and then Senator Richardville, another hero of the bankruptcy, and Speaker Jase Bolger, they stepped up to the challenge, which was huge. And the $350 million over 20 years became $194 million in a lump sum, but we needed to get bills through the Legislature to make that happen. And that leads me to, you know, another hero, Tommy Stallworth, who is to the Senator's left. And it required tremendous courage for Representative Stallworth to support this. As Judge Rhodes mentioned, neither the Governor nor the Emergency Manager nor this plan or anything associated with it were very popular in the City of Detroit, but Tommy really stepped up to the plate and he is I think in large part the reason we were able to get the main bill, the funding bill passed through the House with over 100 votes and that is, again, that is another thing that no one thought was remotely possible at the time we started all this. Randy Richardville demonstrated great leadership in the Senate by getting a Republican caucus to support $194 million for the City of Detroit, which some wanted to paint as a bailout for the city. It wasn't that at all, but that's how it was portrayed by some. But he managed to, once the bills made their way over across the rotunda to the Senate to move them through that chamber into the Governor's desk, again with the support of Senator Whitmer and her leadership on the Democratic side. So, and a key component of that I think was the creation of a Financial Review Commission, which was another bill in the package, so that the city would have ongoing oversight of its finances, which it has now and will have I think for some time into the future and that was something that was very important on the Republican side. So I'll stop talking there, I think we eventually want to get to your questions, but I'll turn it over, back to Gretchen. >> Keep on rolling - Randy, maybe you can tell us some of the challenges from the Legislative perspective because I think ... >> Well, you were one of them. [laughter] >> ... not on this issue, I was very good to work with on this issue. >> I want to defend Gretchen, she was great. >> Oh, my goodness. >> At least when she was talking to me, she was terrific. >> Why do I ever give you a microphone? I don't know, I should have learned after all these years. >> I don't know either, think you'd have learned by now. Senator Whitmer and I actually go back to our days in the House of Representatives here in Michigan, and although we're at very opposite ends of the political spectrum there comes a time, and this is of course the Gerald Ford Center for Public Policy so I'm going to be addressing you mostly - there comes a time when you put the politics aside and you have to govern. And Senator Whitmer and I I think are pretty good examples of that. We would get up and talk on the microphone about things that happened during the day that we vehemently disagreed upon. I was a lot more civil in my explanations usually, but and people liked the way she talked anyways and listened to her sometimes. But there were times when we would go, you know, away from everybody and all the cameras and say what are we going to do to get this done? And you have to understand because I think Mike, Judge Godola, I'm sorry, said it right, the Tea Party took a lot of credit for the Republicans winning in 2010. I don't think they deserved all the credit that they took, but they became very loud during that time and when the pendulum swang from the left to the right, swung I guess from the left to the right they took a lot of credit for it. And in a Legislature like we have, where I had 26 Republicans, Senator Whitmer had 12 Democrats, in a state that pretty much leans a little bit to the Left, those people that were in my room were listening to what the Tea Party said and were very, very adamant that we had to have smaller Government, shrinking Government. And we had just had the Kilpatrick Administration leave Detroit. We had done some work with the DIA in protecting that artwork. We had road taxes being talked about. We had just got done with Medicaid expansion, as well. And I can't tell you how difficult it was to have the expansion of Medicaid vote, which when I got 11 of your 12 I think to vote for. >> Yes, I helped you on that one, too. >> You did, yes, but you had that one. I could never get 12, I could only get 11. >> That was actually the first thing you told me about the first time we met was the scar tissue that was left from the Medicaid bill. >> Well, because it's very true. In order to get something passed in the Senate you need 20 votes, I had 11, we got that done with nine and it took me six months, including the Governor taking out billboards against some of my members. We had the Republicans fighting so badly, which is why she was happy during that period of time. [laughter] But we had just finished that, and it was very difficult. I mean Governor Snyder and I had to go privately into his office with the security people waiting outside to talk through that solution on how we were going to get those votes done because he had come out quite adamantly that we needed to get this done. And he was over in Israel when we broke for the summer, and he started a campaign called Take a Vote, Not a Vacation against my members, who he was trying to get me to get votes for his program. So he flew back from Israel that day after he and I talked on the phone. I would have, too, with some of the things I said to him. But we got back and we just got through that, now he's coming to us and he was challenged to come up with a couple hundred million dollars. But the Governor's office doesn't appropriate, the Legislature does. So after that I've got to go back to my members and say, hey, by the way, even though we won with over a two-to-one majority and we've got a lot of Tea Party kind of people in here and primaries and all that potentially could come forward and run against you, we're now going to, quote-unquote, bail out Detroit. And I was very adamant that it wasn't a bailout, that we had a whole lot of retirees that were going to be left without pensions, and that's what it was really about for me and the Legislature and those handful of people on the Republican side that voted for it. It really had to do about the face of those people that were not going to be able to retire with the promised pensions that they had. And it wasn't a bail out, at all. In fact, what it was was just trying to keep the promise as best as we can. And, by the way, my background is economics. I used to be controller of Fortune 500 companies and things like that. The Attorney General had just recently before that said that the state was on the hook for that money if we couldn't come up with some kind of a deal. Now that doesn't mean that it's necessarily legally binding, but we're talking about $3 billion, something like that, it was a crazy number. >> I think I mentioned that to the Governor, some of my conversations with him. >> I'm sure you did, I'm sure you did. But, so really for me this was an investment. You invest $200 million into this, you're going to get matching funds from the DIA and from other professionals, other philanthropy, you know, we had the whole group of people that were giving money. And so the whole thing falls apart if we don't put our share up, plus we're potentially on the hook for $3 billion. So for me it was just a wise conservative decision. And I got about 10 people to agree with that. [laughter] And that's all that it took. But, Tommy, you had a lot of leadership over in the House, why don't you tell a little bit about what happened there? >> Thanks, Randy. Let me just initially thank the people that are on this panel because from my perspective this deal doesn't happen without a true alignment of the stars. Judge Rosen was incredibly creative in coming up with a plan that incentivized a fix for Detroit. Judge Rhodes did a masterful job in managing the legal processes. But being a Legislator I can't even begin to tell you the number of people who helped move this thing forward. The complexity is just unfathomable to me. We talked about the Tea Party, but there were hundreds of stakeholders who they were blowing up our phones, meeting in our offices, whether they were creditors, whether they were elected officials, whether they were retirees, whether they were pension boards. >> Heard from a few union guys, too. >> Yes, and certainly labor played a key role. And so the challenge was really balancing all of those interests to get to the outcomes we wanted. First and foremost, in my mind, as Senator Richardville said, was protecting the rights of retirees, those who had worked all of their professional lives and retired on a promise that they would have a certain amount of income to live off of and who were facing severe, severe cuts to that income. Secondly, getting the City of Detroit on a level stabilized playing field, where we could - we had a good shot, you know, at turning our city around and improving the quality of life for the families that reside there. And then, of course, lastly, if we want a world-class city, and Senator Richardville always talked about that, we needed to protect our cultural assets. And so this initiative, if you want to call it that, was one that I think was just tremendous. I hate John Walsh isn't here today? >> I thought you said you hated John Walsh. [laughter] >> It did sound like that's what he said. >> Those two were joined at the hip like brothers. >> But my point is we had strong leadership in the Senate, who was able and committed to putting partisanship aside. We had strong leadership in the House, who were equally committed. But also important is the personalities, and so while we disagreed on many things you were looking at personalities who could sit down and actually resolve those differences in a civil way, keeping the outcomes that we all had agreed we wanted first and foremost. When I talk about complexity I can't even tell you how many amendments we entertained. I think at last count in the House we probably approved somewhere around 37, and if you can think about this just for a quick second, you know, when I entered the Legislature I was told that, by my mom, who by the way served in the House for 25 years, she said ... >> She was the best Stallworth we had. [laughter] >> I can't disagree. >> I agree. >> I can't disagree. But she said, you know, Tommy, you're elected in a district, but you have an obligation to represent the interests of everyone in the state. And to which I said, huh? How do you make this work? But it is really balancing the interests of all of the stakeholders, of all of the citizens and trying to come up with solutions and answers that do no harm and, in fact, improve the overall outcomes of those who live in our great state. My challenges were a little unique. I was running for State Senate at the time. I thought I was doing a wonderful thing, although when we talk about the outcomes everybody wants to get well, but nobody wants to take the medicine. And so despite the wonderful outcomes that we achieved, you know, I still have people pointing their fingers at me, they say you're responsible for the cut to my pension, as small as it was. And, quite frankly, police and fire didn't take any cuts in their pensions. But there's still some pain. Now with that being said I'll just say this, this is only the beginning. Right now in the Legislature we're facing issues relative to the quality of education, public education in the City of Detroit, and that will be an equally complex challenge that's going to require the same level of commitment, the same level of civility, the same level of teamwork and ability to resolve differences and seek compromise. And so as we think about the City of Detroit and public policy, the moment in the grand bargain what we accomplished there for me was a legacy moment. I left the Legislature prematurely, but quite frankly I can't think of anything more important or more impactful that I could have done if I had stayed. And so I'm at peace with the time I served and I'm hoping that we can drive the same level of outcomes relative to our public education system. >> If you'd have gotten the roads done that would have been a pretty big thing. [laughter] >> Well, they're working on it, I hear. >> Can I interrupt just to say something real fast? >> Absolutely. >> That's so nice of you. There's a friend of mine and of yours, Joe Schwartz up in the back, who represented the University of Michigan when he was in the State Senate, as well as anyone before or since. He was also the President Protem, and I think he deserves a round of applause for the work that he did. [ Applause ] >> A lot of the students here are lucky enough to take courses with Senator, Congressman, Doctor Schwartz. >> He's got a lot of titles and stuff. [laughter] >> He deserves them all. >> Almost as many as some of these guys. >> So I mean that's great, and the legislative piece I think, you know, was really helpful to understand kind of all the different potential issues that we face as we tried to cobble the votes together. And as I invited this wonderful panel to come and speak to my class of 22 and everyone accepted, I asked the Dean maybe we should open this up for greater viewing and participation, and she said absolutely. And then I took a call from Chad Livengood and we were talking about Hillary Clinton's campaign, and I said you've covered the Detroit grand bargain why don't you come on down, too? And he graciously agreed to do that. chad has been recently awarded a great honor with regard to the work that he's done in investigative reporting and most recently I think covering the gamut course [Assumed Spelling] of interesting things that were going on at the Capitol, so not everyone wants to sit at a table with him, but I'm awfully glad that he's here in an era where we don't have a lot of people covering the Capitol and state policy the way that we used to. It's really good to have someone who is as thorough and has integrity like Chad, so, Chad, welcome and please feel free to tell us a few words of what your kind of perspective was? >> Well, I'm a Political Reporter in Lansing. I cover State Government, Governor Rick Snyder's Administration, and the Legislature and just general politics. And a big part of my job, and I've been on the news since early 2012, has been covering emergency managers and the Emergency Manager Act that the Snyder Administration implemented and then saw all the voters repeal, and then they got re-implemented again almost 30 days later. And I followed all the iterations of that and all the challenges, a lot of legal challenges. So when Detroit got into consent agreement with the city to try to fix its finances in April of 2013 I started covering - 2012, excuse me - I started covering this a lot closer, leading up to the appointment of an emergency manager in March of 2013. I have never covered a bankruptcy before, never really spent a lot of time in Federal Court until I spent about 60 days in Judge Rhodes' courtroom or in the media room, watching the daily in and outs of the largest municipal bankruptcy in US history. My role was to sort of watch this from both the daily court role and also what the Governor was doing, because essentially the Governor was kind of walking through the City of Detroit with his representatives through bankruptcy. And so early on I was learning a lot about just finances of the city. I mean I think this story, if anything, is just about a reckoning of municipal government, state government, everybody had to kind of come to terms with what was in front of them. and that was a lot of what Kevyn Orr, the Emergency Manager's technique was, was to come in and lay bare the facts to people, facts that Detroiters had ignored, facts that frankly the [inaudible] Administration ignored and many others from Lansing to Detroit had just simply not been paying attention very closely to what was going on with the city. I mean the numbers were staggering, they essentially were papering over their deficits every year for a decade, and in many cases the media ignored. I mean when I started looking into this big interest rate swap deal, where the City of Detroit borrowed $1.4 billion of cash ... >> $1.44. >> $1.44, and they pumped it into their pension fund, so it's equivalent of you going out and borrowing money and putting it in your bank account and saying I'm $1.44 billion richer all of a sudden, except you still owe the money. It was mindboggling the way it was described in my own news outlet and the Free Press, the Free Press editorial board called it something similar to refinancing your mortgage, which was nowhere near accurate, but this was kind of a classic case to me of a city that had just been sort of mismanaged at several levels and there was these high level financial decisions made to try to get through the crisis of the day. And what Governor Snyder seemingly and his team really went about doing was trying to untangle this sort of web that the city was tied up into. And so there was that mission, and then there were these two main - the two P's, the paintings and the pensioners, and they were the huge issues that from the outset were going to be the targets of this bankruptcy, it seemed like from the public view and from the observer view. So we really focused on a lot of the personal affects of this, the people, how this bankruptcy could restructure the city, make basic services that a lot of us take for granted. And I got a really - I don't live in Detroit, I live in Lansing, I grew up in Chelsea, I mean I've spent a limited amount of time in my life really in Detroit, but most of my time in Detroit has been spent covering a bankruptcy basically. And I got a real, like a firsthand, during the trial I got a firsthand kind of an experience with the dysfunction of the city. And the Judges would know this from working on Lafayette Boulevard, at Second and Lafayette where the Detroit News and Free Press building used to be until we moved last year, is right across the street from the headquarters for AFSCME Council 25, the largest labor union in the city, the two largest media organizations in the city, share basically the entire corner. The streetlight was out for like a week-and-a-half and it was the most annoying thing in the world, I couldn't understand why it was just out and people were just blowing through it. And I at one time just walking to court decided to take a photo, and I was snapping some photos of cars blowing through it. And what do you know, a cop blew through it, he was turning left because the headquarters of the Police Department was like a block to the north. And so even the cops were ignoring it. And I thought how is it that this busy intersection near, on the outskirts of downtown can't get a light fixed? What is it like in the neighborhoods of the city to live here? And, finally, one day - I finally, after that, I sent an e-mail to my editors, I'm like are we going to do something about this, this is our corner, by the way? You know, like I thought it was kind of outrageous that neither newspaper had written a story about it at this point. And so one of the editors asked Neal Ruben [Assumed Spelling] to go downstairs, Neal Ruben is a features columnist in the news, and Neal was also outraged about it so he got fired up and went downstairs to watch it. And he actually witnessed a car accident involving a pregnant woman. He wrote a column for like a Tuesday newspaper and by 10 o'clock a.m. Kevyn Orr had someone out there from the Lighting Department fixing that thing because Bill Nowling [Assumed Spelling], his spokesman, saw it and Kevyn saw it in the morning paper and they snapped right to it. But it took a newspaper column to fix a major streetlight in downtown Detroit, and but it was really instructive to me, it was like right in the middle of this trial over just how broken the city was. It was really instructive to me that something had to change and clearly the trial was the sort of laying the groundwork for the grand bargain that eventually laid the groundwork for Judge Rhodes' decision about that pensions could be impaired and reduced in bankruptcy court. But it really set the stage for the need for all sides to give some a little bit, and then some sides took major, major cuts compared to the pensioners. >> So at this point we would go to a few questions that I have, and then I've got a couple of great students who have got questions from the audience that they will pose, and we're being told to talk a little bit more directly into the microphone so I'll try to lead by example. But as I think about some of the unique challenges perhaps maybe, Judge Rhodes, you could address the Attorney General played an interesting role and it's the nature of the Attorney General's office, but I just think that that might be worth highlighting because I know it created some consternation, and I thought that might be kind of interesting for the students? >> Well, the major issue on which the Attorney General spoke in court was whether creditors in the case would have access to the art at the Detroit Institute of Arts. It was technically owned by the city, it was a city asset, but he took the position that it was not accessible to creditors in the bankruptcy process because in his view it was held in either what we call a charitable trust or a public trust. And he and his people wrote a very powerful brief outlining the history of the art in the city, and it was a fascinating historical review of the art going back to the 1880s. And I actually found it to be very informative and persuasive. And I'll just add here that I was fairly convinced from the beginning and then my conviction was bolstered by this brief, but the art was never really at play for creditors in the case. And I was ready at any moment to just go out in the court and say that to stop all the litigation about the art, but Judge Rosen, he kept saying you can't do that, Steve, if you do that you'll ruin my mediations. >> Let Judge Rosen explain. >> Well, you know, the art was the only readily monetizable asset, and if we had told the DIA at the outset that it wasn't going to be monetized that would have been game, set, match. We wouldn't have been able to monetize it, it would have been the end of, you know, I would have had nothing to do, we wouldn't be here today. So we had to leave that loose. And, by the way, I will say Steve and I did not disagree about much in the bankruptcy, but we did have a slight disagreement about that. I was less impressed with the Attorney General's opinion than Steve was. I thought there were a lot of holes in it, and I thought that the issue of whether it could be impaired in the bankruptcy was a much closer issue. So it was ... >> So now I have to speak in my defense. [laughter] >> See how the judiciary works over there? >> The legal bankruptcy reason why I never thought it was at play was because creditors would not have access to the art outside of bankruptcy under any circumstances and they admitted that because the remedies for creditors against municipal property are very limited under Michigan law. And I never was persuaded that creditors would have greater rights to property in bankruptcy than they had outside of bankruptcy, that's very counterintuitive. >> There was another factor, which was that Steve with all of the power and authority he had could not override what the emergency manager was going to do. The emergency manager was responsible for the city, and I would remind everyone here that Kevyn had, Kevyn Orr, had indicated that everything was on the table, including the art, and he had gone out and had an appraisal done of the art by Christie's before the filing of the bankruptcy. So even if Steve had not wanted to approve it, outside of the bankruptcy Kevyn could have liquidated the art for the benefit of creditors, and there's nothing that Steve or I or anyone else could have done about that. So the bankruptcy sort of focused on the art, but the art was very much the only tangible asset that I, as the mediator, had available to monetize. >> So one of the things that I'm doing right now is reading Frank Kelley's book, he and Jack Lessenberry just wrote a book about his life. He is the longest serving Attorney General of any state in the country. And so I guess maybe one of the questions I had and maybe this is for Mike Godola, the Attorney Generals, the nature of the office is to be the people's lawyer and that's what people think of. They also represent the Governor. They also represent the Legislature. They defend lawsuits, they can jump in in any lawsuit that they think is impacting your rights. And so the Attorney General was representing in a few different ways on this case, is that accurate? >> Yes. >> And sometimes I wonder if that created issues with the Executive Office? >> Yes, it did and it did in this context and in others because, as Gretchen points out, the Attorney General is a separately elected officer, a constitutional officer in the State of Michigan. And so Governors and Attorneys General don't always agree on everything, including legal issues, even though the Attorney General is the Governor's Lawyer and there is a tension there. And the issue of the art is one of those upon which we disagree. I think we tended more towards Judge Rosen's view of that issue. I think Judge Rhodes may well be right with respect to the legal issue, he may or may not be. I think there's a very good case to be made and he said so in his confirmation opinion, but I agree with Judge Rosen to the extent that it was very important to keep the art in play with respect to the overall resolution of the case. The other thing the Attorney General did was to more or less take the side of the pensioners with respect to the ultimate legal issue of whether or not the state was obligated to carry the city's obligations towards the pensioners, to pick those up. And Senator Richardville is right, it was a $3 billion obligation, I know that because it was in Judge Rhode's opinion. And if the Attorney General was right on that issue that would mean that we, the State of Michigan, were responsible for a $3 billion debt instead of having to bring $200 million to the table. And on that issue we disagreed with the Attorney General, but it was one of those situations, again, where there's a tension and you work through it and we did work through it. >> Well, the Attorney General took the position that even in bankruptcy the Michigan constitutional prohibition on the impairment of pensions had to be respected. >> Right. >> And as much as I appreciated the Attorney General's view on the art, I did disagree with this one and hold that in bankruptcy pensions could be impaired because of the supremacy of Federal Law over State Law. >> So I guess for the benefit of the students and the audience, what would the difference - I mean we talk about this was such a great example of collaboration and negotiation and policy over politics and real courage, some people though did pay a price, right? And we, I think it needs to be acknowledged, but how much greater would the pensioners' cut have been had this process not played out the way that it did? >> So in Kevyn Orr's proposal for creditors he was proposing about 30% -- before bankruptcy, it could have been worse, there were a lot of moving parts and different factors on the underfunding. As Steve said, Kevyn pegged the underfunding at $3.5 billion, it could have been much, much more than that actually using more realistic numbers. So Kevyn pegged the cuts to the pensions at about 30%, and if you think about this, you know, the pensions were not plush. The average pension for the general retirement system, the civilian retirees, was about $19,000 and the average pension for the uniforms, the police and firefighter pension system was about $30,000, $31,000, but they didn't get Social Security and many of them didn't get - weren't eligible for Medicare. So these would have been draconian cuts. And even more than that, and I think Mike and the Governor's team were aware of the fact and certainly the Legislators were aware of the fact that if cuts at this level were implemented it would have thrown many of these folks on the social services programs and the state would have had to have picked up a significant tab that way. So that's one of the reasons why I viewed the bankruptcy as bookended by the art and the pensions at the beginning. By the way, I should say, I don't know how many people know this, there's actually - I did a little sketch right at the beginning of the bankruptcy, after Steve appointed me I did a little sketch on the cardboard backing of a legal pad and that sketch of what became the grand bargain, and that is now hanging in the DIA. [laughter] My grandmother, who was a very successful artist, would be shocked to know that something that I drew is hanging in the DIA. >> It's in the section for abstract art. [laughter] >> Thanks very much. >> It's an original Rosen. >> Sketch is being generous, right? [laughter] >> It's more of a doodle. >> Yes, it really is more of a doodle. >> Well, at this point I think maybe we'll go to a few questions from our audience, from the students who volunteered, and I should put volunteer in quotes. >> Okay, my name is Elizabeth Oliva, and I'm a Senior in the BA program, studying health policy. >> I'm Connor Ruben, I'm a Junior in the BA program, and I haven't been allowed to declare yet, so. >> Okay, so our first question - Governor Snyder and the State Legislature may face a situation in which the largest school district in the state and the largest county get to the cusp of bankruptcy, what suggestions would you offer to solve the difficulties of the Detroit public schools and Wayne County flowing from their debt burdens? Thank you. >> Who wants to touch that? [laughter] >> Well, I'm a Judge now, so. >> Steve? >> Well, I think one of the lessons of the Detroit bankruptcy case, which we have already touched on, is that when a municipal entity or really any entity for that matter is insolvent or in a zone of insolvency it doesn't do anyone any good to kick the can down the road, that has to stop, it has to stop. The phrase that we in bankruptcy use to deal with this issue is simply this, denial is a river in Egypt. [laughter] Okay, denial can play no part in the rational resolution of an insolvency, it just can't, it has to be moved offshore. >> And I would add this and it's a lesson that all of us learned in the bankruptcy, I call it the four season, it starts with Steve's denial as a river in Egypt, I call it candor. The first step in addressing these kinds of structural problems and institutional problems is to face them candidly. You can't step away from them, you have to face them candidly, you can't kick them down the road. So that's the first step. The next step, which was demonstrated by Mike and his team, the Governor and Randy and Gretchen and Tommy, is cooperation. You know, when there are these seemingly intractable problems it often starts, they often start with a lot of scar tissue, and we had to deal with that in the bankruptcy and we had to remove the scar tissue. But once you remove the scar tissue and get folks to focus on what the real issues are and take out the history and the personalities and maybe the politics as much as you can, and you focus on what the real interests are that are at stake, paths to cooperation begin to open. So that's the second C. The third C I would say is courage, and here you have represented up here, courage, people who were willing to not only confront the reality of the situation, but to overcome cynicism, rigidity, self-interests, political interests, step outside their comfort zone, their political comfort zone and make really courageous decisions for the larger benefit. And it took a lot of courage, it took courage for the 13 philanthropies, the foundations, to go to their boards - I mean this was really an out-of-the-box ask that I made of them. It took courage of the DIA to agree to our request to come up with $100 million. So courage is the third C. And fourth, creativity. You know, you really do have to think outside the box. The grand bargain I suppose is maybe the best example of that in the bankruptcy, but everybody was being creative, and we did a lot of other deals in the bankruptcy that were very creative, very creative. So those are the four C's, and I think it's going to require that in other public policy issues, such as the schools, the roads. I'm not volunteering to be the mediator in any of them. [laughter] >> I was going to say perhaps Judge Rhodes could oversee a roads solution, but go ahead, Senator Richardville, you wanted to ... >> Well, the question was specifically about the Governor and the Legislature I think and how you would go about solving a problem like that. I want to be real clear about this, in my years working with Rick Snyder he's probably the best problem identifier I've ever worked with. He can find a problem no matter what. Now he goes about solving it, but he's relentless and positive It is a compliment because finding these problems, like this Detroit bankruptcy didn't start last year, it started 30, 40 years ago, okay? And the same with the Detroit public schools, et cetera, et cetera. So this Governor has stepped forward and said here's a problem and I'm not afraid to tackle it. And so the way this works sometimes is you know the State of the State or he's the guy up in the front telling us what the agenda is going to be for the next year, I'd be the guy sitting behind him to the right and the Speaker would be the guy to the left. A lot of times I had no idea what he was going to be talking about and then, oh, this is what we're going to do, well, this isn't going to be very easy to do. And so specifically when you talk about what we're going to do or what he would do there is we wouldn't have gotten this done, and I'm not - I don't think sharing anything that I can't. but inside the caucus room the primary concern was not just kicking the can down the road, but how do we make sure that this situation doesn't come back again, because the votes that I couldn't get were like they showed me headlines from 1910 talking about Detroit and what problems Detroit had, the 1930s, the 1950s, and it just kept coming back, coming back. So the Oversight Board was a big part of it. The Legislature, even though it's term limited now and they don't have the experience as people who came before, they are people that say we don't want these problems to come back again in the future. And I think that if you're going to have a solution to the Detroit public schools or to the roads or to anything else you're going to have some oversight and responsibility and accountability before anything can move forward. >> I would just add that, well, as recently as this week the Governor had a press conference relative to his proposal for addressing the structural deficit and debt associated with DPS, and he's done that in collaboration with a pretty diverse group of Detroit leaders who formed a coalition for Detroit school children's future and offered recommendations to address the systemic issues. The long and short of it, it is a restructuring of debt, a restructuring of the district, this is what's proposed, that along with the state kicking in money to address the problem. Now some might say it's a bail out and I guess some are calling it another bail out. And so we've got that negative messaging that has to be addressed. But some of the fundamental things that have to be addressed, also, is just like in the grand bargain we've got to make decisions on how we protect collective bargaining rights as we restructure the district, we've got to determine what level of oversight is necessary if, in fact, the state and the Legislature are willing to commit dollars to address this debt. We've got to have a conversation about returning the school board to power, and maybe power is too strong a term, I don't want to offend anybody. But, you know, we have a right to local control, and over the last 15 years we've been denied that, and so even in a restructuring there's a question of who represents residents' voices in this process? And so I think if we're effectively - if we effectively address those things we can address the debt and put the district on a level playing field. But I have to reiterate, just like I did relative to the grand bargain, that's only the beginning, dealing with the money is only the beginning. So just like we still have neighborhood quality of life issues that we are struggling with in the City of Detroit, none of what's been proposed relative to education in Detroit addresses the need for true education reform. You know, how do we actually deliver quality education and ensure that Detroit children are ready and prepared for college and, or are upwardly mobile and can expect to be competitive in a global economy? I mean those are the - that's got to be faced, too, unless we're having that conversation, just fixing the debt really won't get at the outcomes that we truly want. >> I think somewhat implicit in that question might be can the grand bargain be replicated in some of these other sitautions? And I think, unfortunately, the answer to that question is no because none of these other entities, certainly not the DPS or Wayne County, have an asset like the DIA at their disposal. It was valued at somewhere between $450 million and $880 million and was the lynchpin of the grand bargain. In its absence we wouldn't have had a grand bargain. So I don't think that there's likely to be another grand bargain with respect to another municipal financial distress situation or a public schools' distress situation. I don't know what the solution will be. I'm glad I'm not going to have to be a part of it. [laughter] I do think Representative Stallworth is probably correct, that at least with respect to DPS, the state may very well have to come to the table with some money yet again because where else is it going to come from? >> I've been covering this emerging financial problem and DPS for most of this year. I did kind of a deep dive earlier this year into the finances of the district. So I was looking through a certified annual financial report, known as a CAFIR [Assumed Spelling]. Any of you who want to be in government are going to have to read these things, so you might as well start now. And I was reading through it and I was looking at this chart of the enrollment. It was a whole bunch of different data about the number of teachers, paraprofessionals, janitors, librarians, administrators and students, and 10 years ago this school district had 150,000 kids, today they have less than 47,000. But what jumped out at me was 10 years ago they had, in 2004 they had 201 administrators and in the 2014 schoolyear they had 203. And I said to myself how in the hell did they possibly get two more administrators and 100,000 less children? Does that make any sense? And so used this one number as essentially as motivation to dive into the district's finances. And what I found was you have a district that has $15,000 per student, all funds, Federal, state, local, and you have a district that is essentially at the bottom third of school systems in the state as far as number of dollars going into the classroom. You had just almost as much money going into administration that you had into direct basic instruction, I mean just a couple hundred dollars more. I mean where most of the gaps were a couple thousand dollars. So this is a - I kind of really agree with what Mike was saying earlier that this is a totally different subject. You don't have 30,000 pensioners who live in 83 counties who vote, okay, you have 47,000 school children in one contained city. Now everyone, politicians, profess to care about all children, but this is going to get a lot thornier of a subject to try to navigate because it is contained in one district and the Governor's new price tag for rescuing DPS, bail out, this is kind of post auto bail out terminology - rescuing DPS is $715 million over 10 years, that is double what the grand bargain was for the state's cost, which is $350 million over 20 years, the way it sort of spreads out equivalent, even though they paid $200 million of cash up front. But so it's a double ask and it's a lot more complicated, there's governance issues, there's union issues, and there's a lot of issues involving adults really. But it's not - I agree, there's not going to be another grand bargain, there's going to have to be - there's probably going to be a cataclysmic event that sets the Legislature off at some - I have a lot of doubt on this one that they are going to really tackle this issue. The Governor wants to get it done in the next two months because he knows that once the calendar flips over to 2016 a lot of people will get their mind set on elections. But this is a big issue, and another thing, the Detroit bankruptcy and the program bargain apart from that issue, even in Wayne County, as well, is a lot more people had a lot of stake in Detroit than you do in the continued existence of Detroit public schools. Thousands of suburbanites commute into the city every day, and so there, they were very supportive. And we had polling on the grand bargain that showed like 70% support in Oakland County for doing this. Because people in the suburbs were just so tired of a city that didn't function, that they were trying to work in or have a business in or had moved and fled from essentially over the last 30, 40 years. So there's a little bit - and also out-state, if any of you all are from - who all here was actually born in Detroit? I'm kind of curious. I do this survey every once in awhile. And who all of you that were born in Detroit still live there or have a residence? One, two, three - okay, I mean you go out-state and it's amazing, especially people over 50, you can meet people just randomly who were born in Detroit. So there was a lot of sense of pride with the city. I'm not sure that that sense of pride with the school district is still there and because they don't have any stake in it, like because usually your pride in your school district is young people with young kids who want to make sure that their kid is getting the best education. So a lot, like I said, a much thornier issue here. >> I'm going to borrow the Governor's term and say I guess I'm relentlessly positive. >> Okay. >> You know, and there are some mitigating factors that you didn't mention, and one is the fact that over the last 15 years the conditions you've described have come under emergency managers. The state has actually been in charge of DPS and so to the degree administration costs have increased it is the state's responsibility. The other fact is that when the state initially intervened DPS had $80 million in the bank. We've gone from $80 million in the bank now to a $200 million, $300 million deficit. I think it's clear that the state is responsible for the financial straits of DPS up to and including the Legislature's passage, and I'm not trying to get into whether charter schools are good or bad, but we took the cap off of charter schools, which helped drive the enrollment down in DPS. And now not only is DPS failing and struggling financially, so are the charters. And so I don't think there's any real question about who is on the hook, it is the state and so. >> Don't look at me, I'm not there anymore. >> We want you back, Randy. [laughter] You know, and so I just have to believe that with the right kind of approach we should be able to garner the support that's needed to correct the situation. >> Well, I'm not a politician so I don't know anything about all of that stuff, but I do know this in order for the City of Detroit to succeed, in order for the City of Detroit to succeed its schools have to succeed because families won't move back into the city until the schools are succeeding. And Detroit needs families in order to succeed. >> Well, I'm not a lawyer, but it took a long time to answer that one question. [laughter] >> Governor Milliken would say in order for Michigan to succeed Detroit has to succeed. >> And when you talk about it, I think Tommy alluded to the fact that when we're elected we're elected by a district, but the Constitution says we represent all 10 million people. And if you go around the world, the whole world knows about the Detroit bankruptcy. And while it was going on I had people, I'd be in Israel or wherever I was, people would come up and say you're from Detroit, what's going on there, what's going on there? And unless the City of Detroit is the State of Michigan around the world, so we all have to be vested in this. >> Next question, don't ask such a big question. >> All right, so with that we're going to let Connor go ahead and ask the next one? >> So our second question is ... >> Connor, wait, where are you from? Oh, wait, you already did your introduction, sorry. I'll stop. >> Okay, so our second question is from Twitter and this one is a little bit more pointed, specifically to Judge Rhodes - if you were to write the playbook for the negotiating process what would be on page one and how do you begin? >> On page one, I recognize that in order for my bankruptcy case to succeed the case has to be a settled case, not a litigated case because none of the parties and most especially Detroit can afford to litigate for the years it was going to take to litigate all the issues in the case. So it was important to find the right mediator and to lend all the support I, as the Judge, could in the mediation process. So the number one decision, of course, is who should the mediator be? And it was clear to me from the start that Chief Judge Rosen was the right mediator, he had all the right combination of creativity, of connections, of thick skin, of political background and knowledge. And I also saw that from a constitutional perspective, if I can be a lawyer for just a second here, this is the State of Michigan coming to the Federal Government, to the Federal Courts to solve a problem that it could not solve on its own under our constitutional structure because states can't impair debt, only the Federal Courts can do that. So I thought it was entirely appropriate for the Federal Courts to bring to bear all of the resources they could to solve this problem, and so I thought it was appropriate for me to ask Judge Rosen to be the lead mediator in the case. >> Okay, this question is for Judge Rosen - it seems compassion might also deserve a place amongst your C's, would you agree? And to what extent has compassion grown or diminished among the - during the bankruptcy? Are you optimistic about the ability of Detroit to tackle its current problems given the players and communities you interacted with during the hearings? >> That's a good suggestion, I'll add compassion. I think compassion was probably inherent in everything you've heard us say, starting with Steve, certainly me in thinking about the pensioners and how badly they would be hurt, but certainly compassion. But, you know, compassion doesn't get you to the finish line, unfortunately, you have to have compassion but you have to get to the finish line. In terms of Detroit and its future, that's really what the question is, so that's a great question and I'd like to just talk about it for two minutes, if I could, because we can't lose sight of how far we've come. We are almost at the one-year anniversary of Steve's confirmation of the plan of adjustment, almost at the one-year anniversary. So two seconds on where we were at the filing. I've already talked about service delivery insolvent, Steve talked about the numbers, but think about what people were saying about Detroit? Observers and the media around the nation, indeed around the world, were writing Detroit's obituary. If you go back and you read the papers from July of 2013, phrases like ruin porn and urban wasteland complete with full color photographs, right, of graffiti and the ruins in Detroit were routinely used to describe Detroit, and it seemed that much of the world had written this great and historic city, once the auto capitol of the world and its arsenal of democracy, all for debt, that was where we were at the beginning. Less than 16 months later when Steve confirmed the plan of adjustment, the plan of adjustment and the associated agreements shed $7.3 billion in debt and restructured another $3.1 billion, provided $1.7 billion for blight removal, reinstatement of public safety services and revitalization of the city's infrastructure, including its streetlights. Provided for only very, very small cuts to the pensions of its retirees and transitioned them to a more affordable and efficient healthcare plan, that's compassion. Provided for savings to the city's water and sewer system, which itself is transitioning now to a regional system, a much needed regional system, savings of $113 million for infrastructure repair and an income stream of $50 million a year for 40 years. It provided the city with a stable workforce through collective bargaining agreements with all of its unions, something that had not occurred in anybody's recent memory. It provided for real estate deals that will dramatically improve the city's tunnel to Windsor, its parking structures, its riverfront development, its convention center. And this is very important, people lose sight of that, at the filing of the bankruptcy the city's bond rating was at junk status and falling, now the city has received an investment grade for its bond, which will save tens of millions of dollars in borrowing. And the plan of adjustment that Steve confirmed saved the DIA and its iconic treasured art collection and preserved them in perpetuity for future generations and posterity. A lot to accomplish in the bankruptcy. And the future of Detroit is great. >> And I'll just add that when we talk about compassion and especially in the bankruptcy context we have to talk about compassion for all of the stakeholders because when there is a bankruptcy there has to be shared sacrifice by everybody. And we talk about the fact that the pensioners took a very small cut in their pension plan, in their pension payments, but the truth is they took an enormous hit on their healthcare benefits. Basically, what they're left with is a little stipend to buy Obamacare, and so they're going to have the copays and the deductibles that they were not facing before. And, as you may know, these can be big numbers out of a pension check that's $20,000 a year and with a reduced COLA. So there was shared sacrifice there and we have to have compassion for that. And as much as this case was set up as Main Street versus Wall Street it never really was because in order for any of these parties to recover anything of significance in the case all had to sacrifice and all had to cooperate. And the creditors did, there was one class of creditors that took a 30% cut, another class of creditors took a 60% cut, and other creditors took a 90% cut on their claims in this bankruptcy, and the total give-up, as Judge Rosen mentioned, was $7.3 billion. >> And, you know, it's easy to say that you have to have compassion for the retirees and their healthcare and their pensions, which I did, I really did, but the financial creditors took the biggest hits. These were folks who, I mean these are people behind - these aren't just soloists, these are investors, people maybe your pension funds have invested, the faculty here have invested, they took the biggest cuts and the toughest negotiations in the bankruptcy for me were with the financial creditors. The folks who loaned $1.44 billion, the so-called cuts and swaps deal, they got 13%, 13%, and the pensions were able to keep that money, which is maybe the greatest miracle in the bankruptcy. They got 13.7%. >> A bunch of European banks really got hit hard. >> They got hit hard. >> You know, during the bankruptcy I got calls from people, either retirees, a lot of retirees, pensioners. The city was, at the time they were sort of trying to show the retirees early on what life was going to be like after the bankruptcy, so they actually took away their Platinum health insurance plan, where the city was contributing $700 to $800 per month to a Blue Cross plan that was pretty darn good, a lot better than a journalist, maybe even better than legislators. And they were giving them a $125 check, and there were all these problems. The city outsourced the check writing to some company in Oregon and then to get that check to people it took five, six days in the mail, and I don't think someone in City Hall quite thought that through. And so I routinely dealt with several of these people that were looking for their check. And then I dealt with a lady, whose mother, 95-year-old mother was the widow of a firefighter who died - a retired firefighter who died in 1985, which to date me I was three years old in that year. And so she had been on the city's plan for almost 30 years by herself and her husband retired in the '70s. And so she was just sort of - and she was mentally incapacitated and living with one of her daughters, and this other daughter was trying to navigate this system. And I ended up calling Blue Cross on her behalf and trying to - and got, I called a vice president I knew and he got on the phone and got someone to call her, and we got her through it, but it was a nightmare. And I spent like the better part of a Friday doing this. Then I got a call one day from a guy in Coldwater, Michigan, down in the southern part of the state, and he said he owned some limited tax and general obligation bonds, which were just bonds that the city issued for a variety of reasons, most of them were capital improvements. And he wasn't sure whether he had insurance on these things because the people that fought were not the bondholders, it was their insurers because their insurers that they had insurance were on the hook for 100% of whatever they lost, basically, they had to pay out. So if they got 13% payout they had to pay their customers 87% of the cost. So this guy knew what the series was and I said I think that's the uninsured ones. There were like two or three series that were uninsured and it was kind of an odd - and I looked it up. I went through all the - I mean I spent like a good couple hours with that guy on the phone and I found deep in some C records, yes, he had the uninsured series. And it was really kind of painful to tell the guy that you're not going to get made whole, and this is right after the LT Joe [Assumed Spelling] deal where they got 37% cut. >> Not 37% cut ... >> Yes, thank you, covered. So that was a really telling sort of moment that this wasn't just - and this was just a guy who had invested in some bonds. People invest in muni bonds every day, I mean the muni bond industry is a multi-trillion dollar deal and a lot of people have a little piece of their nest egg in this. And this guy had a lot, he wouldn't even tell me the number, but he said it was six figures. And so he was pretty deep in Detroit debt, and so it was a real eye-opening experience that there are some humans even in our backyard that are behind these Wall Street, basically. >> I want to spend one minute talking about the other side of the compassion coin. The other side of the compassion coin is responsibility. We took democracy away from the people of the City of Detroit, we contracted it, we didn't take it away entirely, but we contracted it very substantially. At the end of the bankruptcy case we gave it back to them, right? We put their mayor and their city council back in charge, but a big concern is what's going to happen when this present group of leaders, which is committed to carrying out and executing the plan, is replaced by the next group of elected leaders? I'm very concerned about that, so when I confirmed the plan I told the people of the City of Detroit that democracy is not a spectator sport, they have a responsibility to them and to themselves and to their community to be sure that the leaders that they elect will make the responsible decisions and will execute the plan. We are responsible for our leaders and for the decisions that they make. >> One lesson from Detroit, an important lesson, and not just Detroit, many, many municipalities around the country is to continue to pile debt upon debt, upon debt, upon debt, upon debt without restructuring the basic foundations of the city's institutional and structural financing is a road to oblivion. You know, Hollywood continues to make these fantastical movies about Tsunamis and tidal waves sweeping over cities, the real tidal wave that is sweeping over cities is debt, that is the real tidal wave. You can't make a movie about it, but that is the real tidal wave. >> I mean you could make a movie, I don't know if it would sound very well, but. I think we've got one more question and then we will wrap things up. This has been great. Go ahead, Connor. >> Yes, so our final question is governments have the ability to raise taxes to pay off debt, why was this not pursued in this case either at the municipal or state level? >> Because they maxed out the credit card. >> Do you want to do that or you want me to? >> That was actually a factual issue in the case and we had evidence from both sides on that. The city, of course, took the position that it could not raise the taxes either legally or practically, and the creditors thought that tax increases were practical. But the overwhelming weight of the evidence supported the city's position. The city was already at its legal maximum tax rate, there was no room left under our constitutional debt limits to borrow money. In fact, in this $1.44 billion cops and swaps transaction that Judge Rosen mentioned the city quite likely exceeded its constitutional debt limit, but more importantly than that even if that could be raised somehow the evidence overwhelmingly established that merely raising the tax levy would not result in any actual increase in tax revenues. In fact, may well result in lower tax revenues just because people would not want to pay those higher taxes and they would leave the city. >> As they had been for 50 years. >> You have to understand about cities is that each city, Detroit and all of its suburbs, are in competition with each other for residents and for businesses, and residents and businesses look at the cost of remaining in the city in comparison to the services they get, compared to what they can get at the city next door or further out in the suburbs. And Detroit was in no position to compete on that point where it was, let alone if it tried to raise taxes. >> One of the pre-bankruptcy stories we did at the Detroit News was looked at property tax payments. And in 2012, the year before they got the - went into emergency management, 47% of Detroit property owners did not pay their taxes. I mean this is an immense, huge nonpayment. For a lot of reasons, whether it's poverty or they didn't get the bill, bureaucratic problems, but the big reason always stated was that it's not worth it for the crumby services I'm getting why should - and also just the cost. They'd have these tax bills that were equal or greater than what they could sell their house for, a couple thousand dollars, a two or three thousand dollar tax bill for a house that would fetch barely a thousand bucks, basically, or on tax auction would fetch a couple hundred dollars. So this was, yes, a no-win situation to try to raise taxes, there was nowhere to go. >> Detroit already had the highest tax rates in the state. >> Income tax rate, specifically. >> Income tax rates and property tax rates. >> Yes. >> As far as the state goes I think it's overwhelmingly thought there that we have enough taxes in Michigan and that we ought to be able to find the money within the money that we already bring in, so. >> So that's a hard note for me to end on because that's a debate I'd love to jump into. >> We haven't been able to solve the roads issue. [laughter] >> Right, right. >> No, no, he's the big guy that I'm disagreeing with up there, so. >> I think what we hear here is how optimistic everyone feels, that we are on a path, but that path is long and it requires fixing schools and it requires making sure water is safe, and it requires pulling people out of poverty, and there's a lot more work to do and, hopefully, some of you are going to take those up but, hopefully, they'll be fixed sooner than this age anyway. I want to thank the U of M staff, the people at CLOSUP, the people from the Dean's office, they did all the work. I got credit, but they did all the work here. My students, Elizabeth and Connor. [ Applause ] And I just - I want to make sure everyone knows how lucky we are to have a panel of this caliber and this expertise. I really appreciate your making the effort to come to Ann Arbor, to fight traffic, to fight through accidents on 96 and to still make it. And so I am just extremely grateful and ask that you all join me extending your gratitude, as well. [ Applause ]