Courtesy of Mish.
The Detroit pensioners are up in arms over the latest proposal submitted on February 20 by emergency manager Kevyn Orr.
Bondholders are also upset. If everyone is upset, does that mean the deal is fair?
Let’s investigate the idea starting with Detroit bankruptcy plan includes deep pension cuts
Detroit’s plan to emerge from bankruptcy this year largely hinges on significant cuts to city workers’ pensions and retiree health benefits — actions vehemently fought by public employee unions — as well as decreased payments to bondholders, according to a blueprint filed Friday to restructure the city’s $18-billion debt.
In the plan, which probably will be amended in the weeks ahead, police, firefighters and those departments’ retirees will take a 10% cut to their current pension payment. The pensions of all other city employees and retirees will be cut more than three times as much: 34%. Neither group will receive cost of living adjustments in the future.
Unions immediately decried the bankruptcy blueprint.
“The plan is unfair and unacceptable,” Al Garrett, president of the Michigan branch of the American Federation of State and Municipal Employees, said in a statement Friday. “Retirees cannot survive these drastic cuts.”
Many city employees maintain that pensions are protected under the Michigan Constitution, and that the state must chip in to make sure pensioners are made whole.
“A more than 30% cut combined with the virtual elimination of healthcare is devastating to the people who dedicated a career to Detroit,” Jordan Marks, executive director of the National Public Pension Coalition, said in a statement.
Creditors also objected to the plan Friday.
“While we understand that favoring pensioners and discriminating against bondholders and other creditors might be politically popular, we believe this is contrary to bankruptcy law and will result in costly litigation that will hamper the city’s emergence from bankruptcy,” Steve Spencer, financial advisor to the single largest unsecured creditor in the case, Financial Guaranty Insurance Company, said in a statement.
Detroit Bankruptcy Funding Hinges on Creditor Settlement
Bloomberg reports Detroit Bankruptcy Funding Hinges on Creditor Settlement. …
