Group of Detroit retirees has a deal with city to protect pensions

  • Article by: MONICA DAVEY
  • New York Times
  • April 15, 2014 - 8:23 PM

An organization representing retired firefighters and police officers has reached a deal with the city of Detroit that would prevent cuts to its members’ pensions, officials announced Tuesday. The agreement has the potential to draw the city a step closer to emerging from the largest municipality bankruptcy in the nation’s history.

A central point of contention in the city’s effort to rid itself of overwhelming debt and start over has long been the prospect of cutting the pension checks of retired workers, despite protections in the state’s Constitution. Under the agreement with the Retired Detroit Police and Fire Fighters Association, the current pension benefits of retired firefighters and police officers would remain intact, according to a document released by court mediators. Earlier plans by city officials had anticipated cuts to the pension benefits of those retirees at 6 percent.

Just a piece of the puzzle

Still, the discussions with the police and firefighters association, which represents about 6,500 retirees, were but one piece of a larger puzzle that Detroit officials and several other groups representing the city’s 20,000 retirees — including general municipal workers — were racing to put together Tuesday, with time for negotiations running short. The city was expected by Tuesday evening to file a new proposal for how it would pay off some portions of its debts, known as a plan of adjustment.

Detroit, which in July became the largest U.S. city to file for bankruptcy, citing $18 billion in debt, does not need to have agreements with all of its more than 100,000 creditors in order to pay off parts of its debts and emerge from bankruptcy. Under municipal bankruptcy rules, as long as one class of impaired creditors votes to approve the city’s plan for paying off portions of its debts, a plan can go forward even if some of the city’s creditors object.

But support from retirees would probably give the plan of adjustment a better chance in court, where a federal judge must ultimately determine whether it is fair, as well as a significant political boost in the eyes of the public.

All along, Detroit has made it clear that it is in a hurry to complete elements of its bankruptcy case, one that experts say has moved far more quickly than in some other financially troubled municipalities. The city has practical reasons for wishing to be finished with bankruptcy court by mid-October, because under the state’s law governing emergency managers, that is when Detroit’s state-appointed manager, Kevyn D. Orr, can be removed.

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