ADVERTISEMENT

Orr: Detroit pensions still at risk in bankruptcy

  • Article by: COREY WILLIAMS
  • Associated Press
  • December 12, 2013 - 5:50 PM

DETROIT — The pensions of Detroit city retirees won't be immune to cuts despite a private effort to raise $500 million to help the city eventually emerge from bankruptcy, emergency manager Kevyn Orr said Thursday in an interview with The Associated Press.

Orr, appointed by the governor last spring to run Detroit, said he "absolutely" supports a campaign to tap foundations and wealthy people to prevent the possible sale of city-owned art and preserve pensions. But he warned that the "expectations of the retiree community should be sober."

"Let's face it: having $500 million is better than not having $500 million," Orr said. "If we can find a way to allocate that to pensions — the other creditors might have something to say about that. ... That's a big, big help, but even that amount isn't going to solve the problem."

Orr spoke to the AP nine days after Judge Steven Rhodes said the city is eligible to fix itself in bankruptcy and can cut pensions, overriding a provision in the Michigan Constitution. It was the most significant decision since the historic filing last July and one that adds urgency to the process. The ruling gives Orr's team the upper hand as they try to strike deals with Wall Street bond holders, pension funds and unions.

But Orr said he hasn't noticed any change at the bargaining table since that decision. He wants to file a remedy for $18 billion in long-term debt by early January, including $3.5 billion in two underfunded pension funds.

"We're running out of time even now. ... I can't really say that the creditors' tone has changed in any fashion," Orr said. "They're in very hard positions. There's no money."

U.S. District Judge Gerald Rosen is leading a group of mediators working in private with Orr's team and the city's creditors. Rosen also has reached out to foundations to come up with $500 million to prevent the sale of some art at the Detroit Institute of Arts and shore up the pensions of 23,000 retirees, many of whom get less than $20,000 a year.

"I'm dealing with calculations that affect the lives of people who don't have choices in many cases," Orr said of retirees. "You're 70, you're in your 80s or even your late 60s — it's not like you can go back into the labor market in any meaningful way."

Orr declined to say whether the pensions of firefighters and police officers should be treated differently in bankruptcy than the pensions of other rank-and-file retirees. The public safety pension fund is in better shape, and its beneficiaries typically get more.

He said he has an opinion but considers the issue "too sensitive" to share publicly.

"We would like them to work together as a committee so they can come up with a proposal that makes sense," Orr said.

He said he won't be stopped by a lack of consensus among creditors.

"We would like to think that we'll get some agreed solutions," Orr said, "but there's always a chance we won't and we'll have to go forward with a plan without a sense of agreement and see if we can get it approved in court nonetheless."

The president of the police union, Mark Diaz, called Orr's comments "very presumptuous" and believes higher courts will overturn Rhodes' decision on pension protections.

"I maintain the position that our pensions are indeed protected by the Michigan Constitution and that language was incorporated in our constitution for a reason," Diaz said. "I do not agree with the decision from the bankruptcy court that pensions are not sacrosanct, as the emergency manager said when all this began."

Orr said a safe, clean city could stop the flow of people leaving Detroit and even attract some to the city. The population has fallen to 700,000 from 1.8 million in the 1950s.

Fewer than half of Detroit's 88,000 streetlights are believed to work. About 26,000 have been added or fixed in some of the darkest neighborhoods.

Police response time to 911 calls has dropped dramatically to about 10 minutes from about 50 minutes. Millions of dollars in federal grant money is being used to tear down vacant houses.

Orr said some changes will be seen before he leaves Detroit by next fall but others will take up to three years.

"The average resident thinks that's nice if they're in the neighborhood that gets the lights," he said. "They think it's great if the blighted house they've been living with for 30 years is the one that goes down. The question is will all residents see that change on any time within the next nine months? The probability is not everybody will see the changes everywhere."

© 2014 Star Tribune