LANSING, Mich. -- Americans for Prosperity, the conservative advocacy group supported by billionaire brothers Charles and David Koch, has launched an effort to torpedo a proposed settlement in the Detroit bankruptcy case.
The organization, formed to fight big government and spending, is contacting 90,000 conservatives in Michigan and encouraging them to rally against a plan to provide $195 million in state money to help settle Detroit pension holders' claims in the case, a key element of the deal.
The group has threatened to run ads against members of the Republican-controlled Legislature who vote in favor of the appropriation before the state's August primary. An initial legislative vote is expected this week.
Using public money for Detroit's case "is very toxic, especially to out-state and Republican, conservative-leaning individuals," said Scott Hagerstrom, director of Americans for Prosperity's chapter in the state. "Even out-state Democrats, why send any more money to Detroit? Certainly other areas of the state have needs."
The group's move is a blow to Republican Gov. Rick Snyder, who proposed the state cash as a final ingredient to bring the 10-month-long bankruptcy case to a conclusion. Some creditors are fighting the "grand bargain," but it recently drew support from major retiree groups and unions. The bankruptcy court trial on the city's case will be held this summer.
"This is a settlement. This is not a bailout," Snyder said. "And I want to be very, very clear about that."
Americans for Prosperity, which was founded 10 years ago and plans to spend at least $125 million nationally helping conservatives in the midterm elections, is becoming more active in state politics. Its willingness to spend millions for advertising has made it a powerful player in political contests.
Dave Doyle, a political strategist and former chairman of the Michigan Republican Party, said the organization's opposition could make a difference even though polling shows considerable public support for a settlement.
"What does have an impact is if they start spending a lot of money on TV and radio and doing mailings into people's districts. The threat of that would get some people to pay attention," he said.
Snyder, who took the lead in resolving Detroit's fiscal crisis by appointing an emergency manager for the city's operations, proposed the $195 million to match commitments from private foundations. The money would limit pension cuts for the approximately 30,000 retirees and city workers to no more than 4.5 percent and avert the need to liquidate the Detroit Institute of Art's collection to raise money. Snyder and city leaders have said the museum is important to rebuilding Detroit as a world-class city.
Despite the cost, "It would be more positive to get this behind us," Snyder said. "How many of us have traveled somewhere in the country or the world and had to listen about this bankruptcy?"
But the question is a tough sell for many Republicans who blame the Democrat-dominated city's problems on corruption and overly powerful labor unions.
"I think every member of the Legislature wishes we weren't in this situation where we even have to consider it," said Rep. Robert VerHeulen, a Republican from conservative western Michigan.
VerHeulen said he worries about setting a bailout precedent if other cities fall into financial ruin, but he also sees the value in settling to keep pensioners from suing.
Americans for Prosperity intends to turn up the heat on the Republicans, who hold 26 of the 38 seats in the Senate and 59 of 110 House districts.
"Tell Lansing politicians that Detroit has gotten enough of our tax dollars," the group says on a website created to oppose the aid. "More money can't fix Detroit."
Meanwhile, the Detroit News reported Tuesday that JPMorgan Chase & Co. plans to invest $100 million to revitalize the city, citing three people with knowledge of the plan.
JPMorgan, the biggest investment bank by revenue, plans to back firms that promise to provide jobs and invest in the city, the newspaper reported Tuesday. The investment, over five years, will include loans and grants, the Detroit Free Press reported.
The move follows as much as $15 million in loans to Detroit small businesses by Goldman Sachs Group Inc.
Jamie Dimon, chairman of New York-based JPMorgan, is expected to meet with Mayor Mike Duggan, a representative of Snyder's office, and possibly billionaire Warren Buffett before the plan is detailed on NBC today, according to the Detroit News. Dimon discussed the plan with Snyder in April in New York, the newspaper reported.
Information for this article was contributed by David Eggert of The Associated Press and Elizabeth Campbell of Bloomberg News.
A Section on 05/21/2014