The Canadian Press - ONLINE EDITION

Detroit says retirees and workers have approved pension cuts, a major step in bankruptcy case

  • Print

DETROIT - Workers and retirees approved pension cuts in Detroit's bankruptcy by a landslide, the city reported Monday, a crucial step to emerging from the largest municipal insolvency in U.S. history.

The city disclosed results from two months of balloting, which ended July 11. Judge Steven Rhodes still must hold a trial in August to determine if Detroit's overall bankruptcy plan is fair and feasible to all creditors, from Wall Street to Main Street, but support from retirees is vital.

"It's clearly a victory for the city," said Anthony Sabino, a bankruptcy expert who teaches business law at St. John's University in New York. "It will pave the way for a confirmation hearing. Detroit will be able to move forward, not with absolute financial certainty but far more than Detroit has enjoyed in decades."

General retirees would get a 4.5 per cent pension cut and lose annual inflation adjustments. They accepted the changes with 73 per cent of ballots in favour. Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise. Eighty-two per cent in that class voted "yes."

The counting was done by a private company.

Approval of the pension changes triggers an extraordinary $816 million bailout from the state of Michigan, foundations and the Detroit Institute of Arts. The money would prevent the sale of city-owned art and avoid deeper pension cuts. The judge, however, still must agree.

"It's absolutely unprecedented in a bankruptcy," Sabino said.

There are tens of thousands of creditors in Detroit's $18 billion bankruptcy, from bond holders to businesses that provide soap, but much of the focus of the last year has been on the roughly 32,000 retirees and current and former workers banking on a pension. They have put a real and often anguished face on the process.

The average annual pension for police and fire retirees is $32,000, while most other retired city workers get $19,000 to $20,000. Detroit emergency manager Kevyn Orr has said pension changes are unfortunate but necessary because two funds are underfunded by billions. If investment performance improves in the years ahead, he said, the cuts could be restored.

"I want to thank city retirees and active employees who voted for casting aside the rhetoric and making an informed positive decision about their future and the future of the city," Orr said in a statement late Monday.

Many organizations, including the leaders of retiree groups, had urged a "yes" vote, insisting it was the best option under tough circumstances. But Dorothy Baker, 64, disagreed. Besides the pension cut, the library retiree who lives in suburban St. Clair Shores would lose a portion of her annuity earnings.

"Don't they sell assets in bankruptcy? They haven't sold any assets. There are parking garages and golf courses," said Baker, who worked for Detroit for nearly 39 years.

The Michigan Constitution says public pensions can't be cut, but Rhodes, in his most significant decision in the case, said in December that federal bankruptcy law trumps that shield. It was a groundbreaking opinion that could influence local governments across the country that go broke.

Michigan Attorney General Bill Schuette believes Rhodes is wrong, but he said Monday he won't appeal now that retirees have voted for the cuts.

"I will respect their decision," he said in a statement.

Separately on Monday, a Boston-based restructuring expert hired to advise the judge said Detroit's overall bankruptcy plan is "feasible," a key standard at the upcoming trial. But Marti Kopacz warned that antiquated computer systems, a pledge to spend more than $1 billion to improve services after bankruptcy and a "cultural malady" among workers all will be challenges.

"There are ... employees who don't grasp that their job is to provide a service to the taxpayers versus the taxpayers owing them a job," Kopacz said in a report.

___

Follow Ed White on Twitter at http://twitter.com/edwhiteap .

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Architect Antoine Predock speechless after CMHR opening

View more like this

Photo Store Gallery

  • A baby Red Panda in her area at the Zoo. International Red Panda Day is Saturday September 15th and the Assiniboine Park Zoo will be celebrating in a big way! The Zoo is home to three red pandas - Rufus, Rouge and their cub who was born on June 30 of this year. The female cub has yet to be named and the Assiniboine Park Zoo is asking the community to help. September 14, 2012  BORIS MINKEVICH / WINNIPEG FREE PRESS
  • JOE.BRYKSA@FREEPRESS.MB.CA Local-(Standup photo)- Humming Around- A female ruby -throated hummingbird fly's through the bee bomb  flowers Friday at the Assiniboine Park English Garden- Nectar from flowers are their main source of food. Hummingbirds wings can beat as fast as 75x times second. Better get a glimpse of them soon the birds fly far south for the winter - from Mexico to South America- JOE BRYKSA/WINNIPEG FREE PRESS- Sept 10, 2009

View More Gallery Photos

Poll

Should the Canadian Museum for Human Rights use the word 'genocide' in exhibits on Indian residential schools?

View Results

View Related Story

Ads by Google