06 January 2015

Miller Johnson Proud to Participate in Grand Bargain

A major component of the well-documented global settlement in the City of Detroit Chapter 9 proceeding has come to be known as the “Grand Bargain.” The Grand Bargain was a mediated settlement of a number of outstanding core matters in the Chapter 9 proceeding and is comprised of the Detroit Institute of Arts (DIA) Settlement, the pension and retirement settlement, and the State of Michigan Contribution Agreement.

A key to Detroit’s successful exit from bankruptcy required parties to come together in an agreement that was acceptable to all. This included several large unsecured creditors, bondholders and insurers deeply interested in enforcing their rights under applicable law. Reaching a resolution would require a plan that balanced the competing interests of:

  • providing a viable plan for the future of the City of Detroit
  • maximizing the value of the City’s assets in satisfaction of creditor claims
  • preserving pensions at a livable level for the City’s retirees
  • preserving the City’s art museum as a prized community treasure

Initially, despite painful negotiations, there simply did not appear to be a path to satisfying the needs of all the necessary constituents.

The Grand Bargain is one of the great and most unusual philanthropic gestures of our time. It was coordinated through Miller Johnson client, the Community Foundation for Southeast Michigan (CFSEM), along with the State of Michigan, the DIA and several large charitable foundations, including, but not limited to, the Ford Foundation, W.K. Kellogg Foundation, Kresge Foundation, and John S. and James L. Knight Foundation. In the words of Darren Walker, president of the Ford Foundation, “Philanthropy will not be in the business of bailing out cities, but the work of philanthropy is to problem solve, and this is an example of how when we push ourselves we can find solutions that philanthropy is uniquely suited to provide.”

The participating foundations agreed to make grant commitments totaling nearly $366 million over 20 years. In the end, a total of $816 million was secured with the addition of the commitments of the DIA of $100 million and the State of Michigan of $350 million.

The foundation funders and the DIA’s commitments will be paid to and administered by a newly formed supporting organization of CFSEM, the Foundation for Detroit’s Future. As part of the negotiated settlement, the Foundation for Detroit’s Future will annually collect the payments from these sources, monitor the City of Detroit’s compliance with ongoing grant conditions, and release funds to the City for the pension funds over the next 20 years. With the closing on December 10, the City of Detroit art museum and collection has been transferred to the DIA to be held in a perpetual charitable trust for the benefit of the citizens of Detroit, Michigan and the tri-county region ensuring it remains a cultural and educational asset forever.

Miller Johnson was proud to have Firm members Wendy Parr Holtvluwer and Robert D. Brower engaged by the Community Foundation for Southeast Michigan in connection with the structure, formation and tax-exempt qualification for the Foundation for Detroit’s Future and to work to ensure organizational documents met the participating foundations’ requirements. Managing Member Craig Mutch noted, “Miller Johnson has always taken seriously our commitment to the communities in which we live and work. It is exciting to have had the opportunity for the firm to participate in a meaningful way in this process that was so critical to the future of Detroit and our State.”