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The Grand Bargain’s Architect: Judge Gerald Rosen

When he was appointed lead mediator in Detroit’s bankruptcy case, Chief U.S. District Judge Gerald Rosen sat down and looked at what assets the city had that might be monetized and offered to financial creditors in exchange for debts the city owed them.

He didn’t find much to work with. 

The bankruptcy was largely an assetless bankruptcy. Revenues had been declining for decades in Detroit,” Rosen tells Detroit Today host Stephen Henderson, “I was very, very distressed to see the more I got into it how few assets there really were.”

Joan Isabella

Chief U.S. District Judge Gerald Rosen on WDET’s Detroit Today.

So Rosen thought about what priorities were ”bookending” the bankruptcy case. He found pensions and retirees on one side. “In fairness they had given their lives to the city,” he says. The city-owned artwork at the Detroit Institute of Arts was the other pillar, one that could have value if sold. But Rosen characterizes the potential sale of art as “dropping a bomb.” The DIA anchors the Midtown area, with hundreds of thousands of visitors each year, Rosen knew. Voters in three southeast Michigan counties had just passed a millage supporting the museum, and selling its collection could have created what Rosen calls “a regional civil war.”

He and Bankruptcy Judge Steven Rhodes also wanted the city’s bankruptcy case resolved as quickly as possible without legal issues that would take years to resolve on appeals and would have resulted in what Rosen calls “scorched-earth litigation.”

Sandra Svoboda

Chief U.S. District Judge Gerald Rosen at news conference during the city’s bankruptcy case in 2014.

Enter the “grand bargain.” It was a way that the art could be monetized but not sold, with its value being applied to pensions and saving retirees some cuts. Rosen credits Community Foundation for Southeast Michigan President Mariam Noland with galvanizing other philanthropic organizations to contribute $366 million over 20 years toward pension funding. He got the DIA to put “some skin in the game,” with a commitment to raise $100 million toward retirees. Then Gov. Rick Snyder and others in Lansing lobbied the Legislature for $195 million from state funds. The money shored up Detroit’s pension funds and lessened cuts for retirees if not other financial creditors.

The deal was contingent on pensioners voting to accept the city’s post-bankruptcy plan and to not file litigation over settlements.

There were moments I had doubts,” Rosen says about the whole case.

But the mediated settlements went through. In the case’s conclusion, the “grand bargain” saved some pension cuts, protected the art from sale and prevented further regional animosity over the case.

Rosen tried to negotiate other deals with financial creditors using what the city had to offer. No one wanted City Airport, he says, citing the high cost of improving and maintaining it. A bond insurer got a parking garage with promises to improve it in exchange for future revenues from parking fees there. “It could only be packaged with other assets,” Rosen says.

Term-limited as the Eastern District of Michigan’s chief judge, Rosen steps down at the end of this year. But Detroit’s bankruptcy isn’t quite over for him. He’s at work on a book about the case.

 

Image credit: Michael Ference

Filed Under: #bankruptcy

This post is a part of Detroit Bankruptcy: One Year Later Series .

For a month, the Detroit Journalism Cooperative journalists will explore the impact of the city’s bankruptcy case, including its impact on people and neighborhoods and its long-term implications.

Audiences are invited to a free, community event where they can hear directly from key figures in the case and ask questions. The 6 to 8 p.m. program on Wednesday, Dec. 9 will be at Wayne State University’s Community Arts Auditorium. Learn more.


Presented by WDET in partnership with the Detroit Journalism Cooperative.

Support for this project comes from the John S. and James L. Knight Foundation, Renaissance Journalism’s Michigan Reporting Initiative and the Ford Foundation.

 

  

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