The Detroit Free Press’s personal finance columnist, Susan Tompor, profiles several Detroit retirees and what the Plan of Adjustment’s proposed cuts to their pension payments mean to them. Firefighters. Landscape architects. Librarians. How much are their pension payments, and how will the cuts change their lives?
Now when the stress of the job should be long gone, about 24,000 city retirees are taking on a new kind of stress as they’re forced to deal with personal budget cuts. In Detroit, the average general system retiree’s benefit is less than $20,000 a year. For police and fire retirees, it’s about $34,000.
Emergency Manager Kevyn Orr’s initial proposal includes cuts of up to 10 percent for retired police and fire fighters, while retirees from other city departments would lose up to 34 percent. Tompor explains in detail what that means to several retirees, their families and their lives.
From pensioners and poverty to municipal bond markets and the mighty backlash, national and local media offered up some thought-provoking reading over the weekend after Detroit filed its Plan of Adjustment and Disclosure Statement Feb. 21.
Here are five readings we thought worth sharing:
Detroit residents who work outside the city limits could find themselves paying income tax they owe to the city under a measure Emergency Manager Kevyn Orr slipped into Friday’s filings. The Detroit News reports on what it would take at the state level to collect the estimated $140 million that’s missing from the city’s coffers.
Religion and Ethics Newsweekly weighed in focusing on the effects on pensioners and the role the religious community has (hasn’t?) played in the bankruptcy’s aftermath. “Detroit is a city where people desperately need hope.”
Bloomberg reported “The filing opens a new, potentially more contentious phase of the biggest U.S. municipal bankruptcy” in its article examining how the Plan of Adjustment relies on creditor settlements.
CNBC focused on bond insurers and the backlash to the Plan of Adjustment, finding “investors directly in the line of fire made clear Friday they were braced for a legal battle.”
The New York Times looked to post-Katrina New Orleans for lessons Detroit could learn from, writing “The scale of the two cities and the nature of their calamities differ, but Detroit can learn from New Orleans, where a fix that appeared rational to some experts and civic leaders was thrown aside for a way forward that has been slower and messier but politically more palatable and, many here believe, fairer.”
The Plan of Adjustment came out on Friday and you can read all about it here, at our live blog. What did the day after look like? Well, life continued. We’re still here. We’re all still here.
Detroit Emergency Manager Kevyn Orr’s office has released a statement about the city’s Plan of Adjustment and Disclosure Statement filed today in U.S. Bankruptcy Court.
Here’s what the city considers the highlights of the plan:
* Devotes $1.5 billion over 10 years to capital improvements, blight removal and equipment and technology upgrades.
* During the next five years, up to $500 million of the $1.5 billion will go toward blight removal.
* Proposes 20 percent payment to unsecured, non-retiree creditors in the form of new securities from the city and a pledge to increase that if the city’s finances improve.
* Assumes $465 million from third-party donors and the Detroit Institute of Arts toward the pension funds over two decades, subject to city and pension fund agreement and conditions.
* Includes Gov. Rick Snyder’s proposal to send $350 million of state money to Detroit over 20 years.
* Allows that if police and fire pensioners agree to the plan and there is some settlement with the state, they could receive more than 90 percent of their pensions with the elimination of cost-of-living allowances. General retirees cold receive in excess of 70 percent of their pensions after elimination of cost of living allowances.
* Moves current city employees into defined benefit plans.
In other development, mediations continue toward agreements with key creditors in the process overseen by Chief U.S. District Judge Gerald Rosen. Talks are ongoing for the interest-rate, pension debt swaps agreement as well as the future of the Detroit Water and Sewerage Department.
A Wayne State University Law School audience was privy to a few insights about Detroit Mayor Mike Duggan’s administration from the city’s corporation counsel, Melvin “Butch” Hollowell.
• Mayor Mike Duggan’s cabinet meetings are Wednesdays, and everyone there is evaluated each week. A White House representative is at the table.
• The mayor and his staff have “great relations” with the new Detroit City Council as well as the emergency manager’s key staff.
• The memo of understanding between Duggan and Emergency Manager Kevyn Orr “isn’t perfect, but it was a pretty good deal.” (The city’s police chief and top financial officer report to Orr, but Duggan oversees the rest of the city’s departments.)
• In response to a question about the quasi-public groups involvement in the city, Hollowell said the mayor “is going to take control and has taken control of the economic development for the city. Tom Lewand is on his staff for that reason.” (Lewand is the group executive, jobs and economic growth.) “It’s not like we’re going to have rouge economic development around the city. It ain’t happening,” Hollowell said.
Appearing at the school’s “Good Governance Lecture Series” with Portia Roberson, group executive of human rights and ethics at the city, Hollowell offered frank, if overwhelmingly positive, answers to questions about the current city operations and how the new mayor is working with the emergency manager.
“We don’t agree on everything,” Hollowell said. “We don’t want to be where we are just butting heads on everything because we’ve got work to do. From the very beginning we’ve tried to structure a cooperative relationship with the emergency manager.”
Hollowell was assistant Wayne County executive from 1985 to 1991, overlapping tenure in that office with Duggan, who was deputy executive from 1987 to 2000. Hollowell also served as general counsel for the Detroit branch of the NAACP and worked for Duggan’s campaign as chief legal counsel before being named to the city administration.
He predicted a busy year with many challenges, including the planned three-year budget that will be part of the bankruptcy restructuring process.
“It’s intense on the 11th floor,” he told the friendly audience. “Make no mistake about it, it is not for the fainthearted.”
-By WDET’s Sandra Svoboda
@WDETSandra and firstname.lastname@example.org
NextChapterDetroit’s Sandra Svoboda appeared with Michigan Public Radio Network’s Rick Pluta and State Rep. Rashida Tlaib (D-Detroit) on The Craig Fahle Show to discuss this issue.
Michigan’s term limits are widely vilified for causing damaging turnover, a loss of institutional knowledge, increased power for lobbyists and decreased cooperation among lawmakers in Lansing. But when Next Chapter Detroit started asking about how term limits have, are and will affect Detroit’s bankruptcy, their effects became debatable and complex. Political observers and elected officials interviewed had answers starting with “not much” and “that’s an interesting question.” Some said “they make it difficult to navigate” the complex legislative policy environment. Others blamed term limits for a lack of adequate or proper state support for Michigan’s largest city.“I really think we’ve lost (millions of dollars) because of term limits,” says Rep. Rashida Tlaib, (D-Detroit.)
Enacted two decades ago, Michigan’s term limits apply to the state legislature and statewide executive offices. Representatives are allowed three, two-year terms, while senators, the governor, the attorney general and secretary of state may serve two four-year terms. In the 15 years since term limits starting having an effect, Detroit has had its steepest decline. That financial collapse is linked to a variety of economic and social factors.
But there are also crucial political components in the Legislature related to the city’s run up to, filing of and eventual emergence from bankruptcy that may have gone differently without term limit dynamics also involved. For example, some of Detroit’s leaders and advocates can’t forgive the state for a revenue-sharing agreement that by some calculations has cost the city hundreds of millions of dollars. The 1998 pact, described as a “handshake deal” between then Gov. John Engler and Detroit Mayor Dennis Archer, dictated that the city would cut is income tax rates in exchange for $333.9 million annually for nine years in revenue-sharing funds.
“Many of today’s lawmakers are ignorant of those particular agreements, making them even more susceptible to the carefully scripted narrative that all of the city of Detroit’s financial challenges are self made instead of taking the time to look at some of the history,” says Ken Cole, the city’s lobbyist. “(The) broken agreements ended up costing the city hundreds of millions of dollars and contributed greatly to the financial collapse.”
Then there was the emergency manager legislation itself. While several cities and school districts have had such administrators installed by both Gov. Jennifer Granholm and Gov. Rick Snyder, the current legislation barreled through a lame duck legislature after voters rejected the previous law in late 2012. The Detroit caucus in Lansing was powerless to stop it, and Kevyn Orr arrived in the Motor City a few months later.
The Chapter 9 bankruptcy filing happened mid 2013. The next legislative battle could be over Snyder’s budget proposal to provide $17.5 million a year for 20 years to Detroit, a proposal he has been lobbying for since he proposed it to the legislature’s Joint Appropriations Committee Feb. 5.
Bruce Timmons, former legal counsel for the Michigan House Republicans, says even with his own party in power, the governor has a tough challenge. “Sadly I think there is still an anti-Detroit bias, there has been for a very long time, among Republicans,” says Timmons, who retired last year after more than four decades as a legislative staffer. He posits the limits imposed on legislators curtail the time they can spending learning, understanding and perhaps sympathizing on complicated issues.
“If you’re there long enough, you get a chance to really broaden your understanding. You get to know what’s going on,” he says. With relatively weak representation, as compared to past eras, the Detroit caucus arguably does not have the power to shift political will in the Senate and House to approve such funding.
Outstate legislators fear backlash in their home districts, assuming voters’ short memories wouldn’t allow “forgiveness” at the polls for a pro-Detroit stance on funding matters. “They don’t know they can make a tough vote and survive,” says Bill Nowling, Orr’s spokesman, who worked as a legislative staffer in Lansing in the 1990s.
But Bill Ballenger, editor and publisher of Inside Michigan Politics, cautions against assigning too much blame to term limits for how Detroit is perceived and treated in the state capitol. “The Michigan Republicans completely run the show from out state, and despite the fact they may give lip service to what’s going on in Detroit might be helped, I’ve got to tell you, there isn’t much sympathy for Detroit in the legislature today,” he says.
While Democrats have seen their influence slide with Republican majorities in both chambers, Detroit has seen its representation there cut in half as the city’s population loss is reflected in its number of legislative positions. In the 1960s, Detroit’s representation peaked with 24 representatives and 9 senators with districts drawn entirely or primarily in the city.
Today, says Zachary Gorchow, editor at Gongwer News Service, there are just 10 house and five senate districts with exclusive or significant Detroit geography. “The biggest factor that’s hurt Detroit has been you’ve got so much less representation now than you had 30 or 40 years ago,” Ballenger says.
Numbers withstanding, term limits researcher Marjorie Sarbaugh-Thompson says the post-limits environment has changed how individuals interact and relate to each other, which affects how deals are done. “There used to be friendship networks that were quote elaborate groups of friends who would be across party lines. They had opportunities where they could sit down and get a deal done,” says Sarbaugh-Thompson, a political science professor at Wayne State University. “None of these clusters of friends are bi-partisan now. Those bi-partisan clusters have vanished. They’re gone.”
With the Detroit caucus entirely Democratic and both chambers with Republican majorities, Sarbaugh-Thompson finds little cooperation happening on highly charged, partisan or complicated issues. And Detroit-related legislation is nothing if not that, term limits or not.
-By WDET’s Sandra Svoboda @WDETSandra and email@example.com
– Feature Image Source: Phillip Hofmeister