Detroit this week sent out roughly 100,000 ballots to its creditors, including about 32,000 pensioners, who will weigh in on the city’s debt-restructuring plan and the cuts it makes to their benefit packages. Bankruptcy Judge Steven Rhodes will consider the results at the July confirmation hearing but because of agreements reached with two creditors, Rhodes by bankruptcy law could approve the plan as is.
What’s tricky here is if either group of pensioners — former police and fire fighters and non-uniform worker/retirees — fail to vote in favor of the plan, the so-called “Grand Bargain” goes away under the current terms the city has presented to the bankruptcy court. That’s the deal supported by Emergency Manager Kevyn Orr, Gov. Rick Snyder and others that would bring together foundation, Detroit Institute of Arts-raised and state money to help fund the pension system and protect the museum’s collection from sale to raise cash to pay creditors.
Without affirmative votes from both groups of pensioners, the cuts to pensions reach deeper. As the plan currently stands, all pensioners lose most of their previous cost-of-living increases and general retirees’ payments are dropped by about 4.5 percent. In addition, retirees who received annuity payments that had a guaranteed rate of return (with the difference between that rate and actual value being paid to them from the pension system funds) would “pay back” up to 20 percent of their annuity’s value through reductions to their future pension payments.
With a “yes” vote, retirees also give up any existing or future legal claims they have against the city or the state involving the bankruptcy or the emergency manager law.
What makes the voting environment even more complicated is that just as retirees are beginning to receive their voting packages this week, Michigan legislators are just beginning formal, public deliberation about the state’s proposed funding and oversight package for Detroit. Kevyn Orr was in Lansing May 13 and hearings are planned over the next week. A poll commissioned by the Detroit Journalism Cooperative found support throughout Michigan for using state money to help “bail out” Detroit.
Meanwhile, House Speaker Jase Bolger continues to advocate for labor unions chipping in toward the Grand Bargain, a demand that has put him at odds with many.
The city has reached agreements with the leadership of several retiree and employee associations (two police and firefighter groups notably withstanding), but now the individual members will vote. Ballots aren’t due back to the city until early July, so these creditors will have some time to see what happens in Lansing with the aid-accountability package and in bankruptcy court as Judge Rhodes considers a series of objections to the city’s Plan of Adjustment and Disclosure Statement.
Bankruptcy is a busy business.
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org