The confirmation hearing for the city’s Plan of Adjustment is continuing, and after an early morning glitch, we now have sound in the media room. Witnesses for bond insurer Financial Guaranty Insurance Company (FGIC) and holders of pension debt are scheduled today.
Before the hearing started, attorneys for FGIC told Judge Steven Rhodes they expect to announce a settlement this week. “Pro Se” objectors, people without attorneys, are scheduled for tomorrow.
The first witness is William Fornia, a pension consultant.
I’ll be back with more from court later this afternoon. I’ve got to go fundraise on air on WDET, 101.9 FM or stream it from www.wdet.org. It’s our Pledge Week where we welcome new members and thank our sustaining friends!
During the second half of the morning court session, Fornia was questioned by city attorney Evan Miller, who challenged some of his projections. Fornia also took questions, largely about procedures for calculations of pension costs, from Claude Montgomery, who represents the Official Committee of Retirees. The committee is supporting the Plan of Adjustment.
Of Detroit’s 21,390 current retirees, about a third live in Detroit, Fornia said.
The actual numbers, from his testimony:
7,450 Detroit retirees are city residents.
13,940 live elsewhere.
After more than two dozen witnesses called by the city to support the Plan of Adjustment, creditors are now making their own arguments, challenging provisions in the plan. Chief among them: the amount the city projects it will need to pay for its two pension funds: The Police and Fire Retirement System and the General Retirement System.
The Plan of Adjustment uses a 6.75 percent interest rate for future investments by the funds. Today’s first witness, William Fornia, spent some time challenging that number. Fornia’s firm, Pension Trustee Advisors, is located in Centennial, Colorado.
He called the 6.75 percent “excessively low.” The city’s witnesses called it “conservative.”
“By being so low, it causes the claim to be higher. The pensions funds have earned their assumed rate of return over the last 25 years,” Fornia said. “It seems inconsistent they’re using rates as low as 6.75, it’s certainly inconsistent with common practice.”
He’s being questioned by attorney Jonathan Wagner, who represents holders of the Certificates of Participation from the now-controversial 2005 pension funding deal.