Detroit reaches deal to settle Book Cadillac financing lawsuit

[Hypestyles]

Rule Number One for pension funds: Invest economically rather than socially.

What does this mean, exactly?

[corktownyuppie]

What does this mean, exactly?

It means that pension funds need to be managed with the highest priority of serving the needs of the pension recipients -- rather than serving the greater good of the community around them.

Now obviously, whenever it's possible, the pension funds can and should be used in a way to benefit both. That would be the highest and best use of getting the most benefit for the dollars in the fund.

But the moment a pension fund is being used to fund projects in the hopes of creating jobs more than protecting pension recipients, you're going down a tough road. And of course, when the funds are being used to benefit the people in charge of the fund rather than the people relying on the fund, then....

I'll admit that I haven't studied with too much depth the funding structure of the Book Cadillac, other than to know that there are 20+ layers of financing, and that it took over a decade of negotiating to find a way to get the project funded. While this project by itself may have been a bad investment for lenders, you have to weigh that against the financial environment at that time. The B/C completion happen to coincide with the Great Recession in 2008, and one has to wonder how the lenders would have fared in a more normal economic climate. It's not like the Book Cadillac went into default while everything else was holding up...the carnage was unavoidable, in every suburb, city, and metro area.

Lastly, one has to consider the huge intangible benefits of the completion of this project. The Westin was one of the first successful rehab project for an old abandoned building...while it has been tough for lenders, its relative operational success paved the way for Broderick Tower, the David Whitney Building, all of Capitol Park, and now the Book Tower, the Wurlitzer, and the Metropolitan Building.

Not saying that I'm in support of the way the pension funds were used here...like I said, I haven't vetted the ridiculously complex structure of the finances. Just saying that it needs to be examined in the context of everything else taking place at that time as well as with some credit for its role in jumpstarting development downtown...all of which has some positive benefits in the city's general fund via income taxes, some incremental property taxes, and general economic environment.