Pivotal piece of land may delay Detroit bankruptcy deal

Detroit has reached settlements with all of its creditors, clearing the way for the federal judge overseeing the city's bankruptcy to announce his decision expected next week.

The final piece of the puzzle involved giving the last holdout several pieces of city land - but Fox 2 found some of that land may not be the city's to give away.

Not all of the land is owned by Detroit only, as one piece in particular may be the final hurdle in resolving the largest municipal bankruptcy in US history. 

The issue is a 30-year agreement Fox 2 got from Wayne County Community College, it says that the city of Detroit owns 90 percent of the Joe Louis Arena garage and the college owns 10 percent . 

They are both equally entitled to use that land, equally entitled to make decisions with that land," said John Pottow, a University of Michigan law professor. "And if they want to sell that land, both of them have to sign off on the sale of the land."

The deal has worked out for more than 30 years. In return for 10 percent of the land underneath the garage, the college can use 300 of the garage's 3,000 spaces, or 10 percent for 10 percent.

But the problem is, when the city offered Joe Louis Arena and it's parking garage to Financial Guarity Insurance Company to resolve the bond insurer's bankruptcy claim, the college wasn't part of the deal.

College officials didn't want to go on camera, but they believe they are entitled to something for their land.

Pottow, a bankruptcy expert studied the deal, and he agrees.

"It surely creates a problem for the city," he said. "Because the city now has to go back and tell FGIC, 'By the way we don't own the land, but we have these great partners over here and I'm sure they are going to be very enthusiastic about it as well.'"

It's not clear whether FGIC knows about this agreement, or whether the wrinkle will derail the deal. Lawyers for the creditor did not return Fox 2's messages.

City officials responded to a request for comment, but they didn't have much to say.

The city's official response came in an e-mail from a spokesman for Mayor Mike Duggan. It says: "This matter is subject to mediation, so we are not able to comment on it at this time."

Closing the deal may hinge on high-stakes mediation. 

"Knowing how everything has gone in this case so far," Pottow said. "I will bet you any amount of money you want that if that happens, the judge will say 'Why don't you guys go and mediate it and see if you can come to a consensual agreement.' Because that is how everything has gone in this bankruptcy case so far." 

Pottow doesn't expect the college to stand in the way of the deal, but he says they have a lot of leverage 

"They literally have a veto right," Pottow said. "They can say no." 

Pottow says that unless anyone can prove that this deal is void, they're going to expect something for their land.

"Wayne County Community College is not going to give away anything for free," he said. "So they are going to want to participate in what they see as the surplus of this transaction."

This afternoon Fox 2 spoke to Wayne County Community College Chancellor Curtis Ivory. He said he is confident the college still has a 10 percent stake in the property.

He says if anyone can prove otherwise, they have not shared that information with the college officals. 

The college wants to be involved in the conversation, they are not sure what it is worth, they don't know if there is another property they would like to have. 

Fox 2 is being told that everybody has been consulted so far but the college says, "everyone but us."
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