Potential that state may try to pull in exchange for shoring up pensions?

[corktownyuppie]

Guys, ok...the conspiracy theories are there. And yes, there are extremists and crazies. More than I'd like there to be.

But let's look at the other side of this for a second. You can't expect legislators -- especially outstate legislatures -- to support this out of the kindness of their hearts. They're feeling the hurt of lost revenue sharing and smaller budgets too. [[Remember the $500MM that the state owes us? Well, we're not the only municipality that is getting burned by the change in the revenue sharing model.)

The big leverage that Snyder has going into this is that there are real consequences if the state doesn't come through with their promise.

[[1) When their $350MM drops, so does the other $500MM pledged.
[[2) Without $850MM pledged, the bankruptcy falls apart.
[[3) You have the potential for not just art sales but also the state getting locked up in a costly litigation scenario over the state constitutional protections of the pensions.

So, no, I don't expect Bart Stupak to help Detroiters out because he wants to help Detroiters out. I expect him to be given the same pressure that's been coming on to pensioners for the last 9 months... Either a) they get on board with this pension settlement or b) they risk spending millions fighting in court and risk losing by having to cover all the pensions, COLAs and all...not to mention the fallout from putting the art at risk.

The art might not be selling point to outstate legislatures. But haven't you guys seen the theme of this bankruptcy? It's recurring.

- Banks are told to accept 30% in a mediation settlement rather than risk only getting 0-5% in a cramdown.

- Pensioners are told to walk away from COLAs, health insurance, and 5% of their pension check or risk losing 30% in a cramdown.

- The DIA and their supporters are told to raise $500MM in pledges otherwise they risk losing $2 Billion in a forced liquidation

- Belle Isle Visitors are told to quit it with the open intox and the speeding, otherwise they'll get hit with the DUI, the speeding ticket, and the arrest for 18 outstanding warrants.

- Wayne, Oakland, and Macomb county will soon be asked to choose between paying the $47MM per year in leasing fees in exchange for control...or they will pay out $150MM per year in profits to a privatization contract.

So it will be the same with the state legislature. That doesn't mean it's going to be easy...or that it won't be contentious or messy. But the theme will remain the same. $350MM makes this problem go away. But if you refuse, you create a $850MM problem right away and then add the possibility of a $2 Billion litigation liability shortly after.

Pick your poison.