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Nearly 16 months after Detroit filed the largest municipal bankruptcy in the country’s history, a federal judge approved a plan to drop the city’s $7 billion in debt and invest over $1 billion in public services. Hari Sreenivasan speaks with Darren Walker of the Ford Foundation, the organization that donated $125 million to a crucial part of Detroit’s survival plan.
Nearly 16 months after Detroit filed for bankruptcy, a federal judge approved an unprecedented and complex plan today that would bring the city out of bankruptcy and is designed to give it a fresh start.
The plan allows Detroit to shed $7 billion of debt, reinvest more than a billion dollars into neglected public service, cut pensions of general city retirees, and cut payments to bondholders.
Hari Sreenivasan has more on the story.
One crucial component of the plan that came together in the past few months is a so-called grand bargain. It allows the city to accept more than $800 million from nonprofit foundations, the state and others over two decades. That deal protects the city from selling a noted art collection at the Detroit Institute of Arts and reduces the size of pension cuts.
The Ford Foundation has donated the most money to the grand bargain, $125 million in all.
Its president, Darren Walker joins me now.
Thanks for being with us.
So, my first question is, what are nonprofit foundations doing in what seems like a bankruptcy bailout?
DARREN WALKER, Ford Foundation:
Well, we're not in the business of solving bankruptcies, but we do solve big problems and work with leaders at the city level and the community level, public and private sectors, to help solve community problems.
And this is one example of a group of foundations coming together at the behest of Judge Gerald Rosen to help solve this challenge.
So, is this a template for other cities that might be in financial straits?
This is not a template for other cities, but there are many lessons here.
This was a complicated $20 billion bankruptcy with thousands of creditors and many contested issues. But our focus, which was on saving the Detroit Institute of the Arts and ameliorating the situation for the workers of the city, particularly those retirees under the pension fund, were — that was what we were able to help accomplish.
But this doesn't mean that other cities are going to look to foundations to solve their bankruptcy issues. This is not a template for that.
So, you mentioned the Detroit Institute for the Arts. One of the concerns is, why doesn't the DIA sell some of this artwork to help Detroit get back on its feet, especially when bondholders, investors, even pensioners are al taking haircuts or tightening their belts?
Well, every great American city has a great cultural institution. And the DIA is one of America's greatest treasures. It's unthinkable to imagine a future for Detroit without the DIA.
So, what would this money allow the city to do? The judge had some tough criticism of what the city is not doing well right now. In certain parts, he says the problems run deep, have for years, and some of it is inhumane and intolerable.
Does this consortium of foundations agree that a lot more needs to be done?
Absolutely a lot more needs to be done, Hari.
But it's important to keep our eye on the prize. Detroit is now back in the starting blocks. It is positioned well for a great future. There's uptick in employment, small business development. Many of the indicators of economic and community well-being are improving. The question now is, what does the future hold for Detroit?
And we believe the future is very bright.
While does close one particular chapter or nearing closing a chapter, it kind of opens another section for Detroit's life in the next 10 or 20 years.
And what are the foundations looking for as these indicators that you started to tick off that the city is on the right path? You're not writing an unconditional check for 10 to 20 years, are you?
We were clear our resources would be used to secure the pensions and secure the museum's collection, but we are investing in its future, in the civic grid. Democracy needs to work in Detroit, and in order for that to happen, we need to invest in civic organizations, in cultural organizations, in health and well-being, and of course in education.
All of the foundations who are engaged in the grand bargain are deeply committed to investing in those areas. It's going to be essential for the future of the city.
So, while we're talking mostly about Detroit's financial struggles, there are underlying challenges about race and class. What do you think something like this grand bargain, like the solution does to begin addressing those deeper problems that the city might have?
Well, Detroit sits at the narrative of the American city.
And, as in many American cities, there are challenges around racial issues, and we can't put under the rug the fact that Detroit has been challenged for decades around racial issues. The city and the region must come together to solve their problems collectively. But in order to do that, the city must have great leadership. We're all encouraged and looking forward to a new mayor, a new city council who are engaged and eager to take up the helm.
So we're excited at the Ford Foundation to support this effort.
So, 10 years from now, best-case scenario, it goes as you envision, what are we here talking about, about Detroit?
What we talk about is a vibrant city with a growing population, an inclusive economy, schools that deliver quality education, a transportation system founded by the new M-1 line, and a recognition that in order for Detroit to be sustainable, we have to invest in its institutions and in its people.
And how do you instill a sense of cultural — or, I should say, perhaps inject energy into the culture that already exists in Detroit? Because some people say, well, this is a great plan. It kind of was cooked up by a lot of non-Detroiters.
Well, in fact, the Ford Foundation has been in Detroit since 1936, when we were founded by Edsel and Henry Ford.
But the bottom line for Detroit's future is that the local people do have to control it's narrative and its future. But this doesn't mean pitting incumbent residents against new residents. Any vibrant great city always has new people coming, but it also invests in incumbent residents.
And so the understanding of the tension is reasonable between the many new residents who are moving to Detroit and longtime leaders, who have felt the results of this investment and who are a little beleaguered by it.
All right, Darren Walker, president of the Ford Foundation, thanks so much for your time.
Happy to be here. Thank you, Hari.
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