Traverse City Record-Eagle


May 13, 2014

Critical pension deal to be put before Detroit employees

DETROIT (AP) — The historic restructuring of Detroit through bankruptcy court is taking a crucial step by putting a key plan before the some of the people most affected: roughly 30,000 retirees and city employees.

Ballots have been sent to those who qualify for pensions and should be arriving by midweek, Bill Nowling, a spokesman for state-appointed emergency manager Kevyn Orr, said Monday. Detroit is proposing to cut pensions by 4.5 percent and eliminate cost-of-living payments. Retired police officers and firefighters have a better deal that trims only cost-of-living payments.

While there are many moving parts to the restructuring, the pension agreement is viewed as a centerpiece. If the retirees and employees don’t support the plan, hundreds of millions of dollars from foundations, philanthropists and the Detroit Institute of Arts would vanish and deeper pension cuts would become inevitable.

Creditors — not only retirees but also big banks and others — are voting on the plan, and ballots are due by July 11. That will be followed by a summer trial on Orr’s plan to restructure the city’s debt, and the ultimate step comes when Judge Steven Rhodes rules on the plan by the end of September.

Detroit filed for bankruptcy last July, citing $18 billion in unmanageable long-term liabilities. Orr’s goal is to avoid a cram-down, a bankruptcy term that gives a judge sweeping power to settle disputes.

The employees and retirees now must decide if they can live with less — albeit more than the drastic reductions Orr initially proposed.

Under tentative agreements reached by negotiators, police and fire retirees would not lose pension benefits but their annual cost-of-living allowance would be trimmed to 1 percent. Other city retirees would see a 4.5 percent pension cut and the elimination of cost-of-living payments. There is a possibility of restoring some of that money if the health of the two pension funds improves.

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