Detroit city workers, retirees push back on pensions

Wed Jul 10, 2013 10:11pm EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

DETROIT (Reuters) - With the threat of a city bankruptcy looming, Detroit city workers and retirees are pushing back against the state-appointed emergency manager, filing lawsuits to limit his options and refusing to accept demands to keep details of their discussions secret.

One lawsuit, filed in Ingham County Circuit Court in the state capital Lansing, seeks to stop Governor Rick Snyder from allowing the emergency manager, Kevyn Orr, to file Chapter 9 municipal bankruptcy. That lawsuit claims Orr's plan to significantly cut vested pensions would violate strong protections in the Michigan constitution for retirement benefits of public-sector workers.

A second Detroit employee lawsuit challenges the 2012 Michigan law that created the emergency manager position.

In his June 14 proposal to creditors, Orr listed pensions as unsecured debt of the city. Payment on pensions, retiree healthcare and $641 million of general obligation bonds all would be made from the city's proceeds from $2 billion of notes Orr plans to sell as part of his restructuring plan.

The plan, if enacted, would be expected to result in significant cuts in pension payments. Although the city currently lists $643.7 million in unfunded pension liabilities, Orr in his report said the number is closer to $3.5 billion if "more realistic assumptions" are taken into account.

Meanwhile, a lawyer for the United Auto Workers union, which represents some city workers, refused to participate in a meeting with Orr's representatives after declining to agree to mandatory secrecy requirements demanded by Orr's staff.

The lawyer, Michael Nicholson, said Orr's representatives wanted an agreement that he would not repeat anything he learned in the meeting to anyone outside of the meeting. The secrecy agreement also required a pledge that the union would not use information from the meeting in any future court proceedings.

"It was polite enough," Nicholson said. "I was willing to stay but I wasn't going to agree not to talk about it publicly."

Nicholson said Orr, who has spent most of his career as a corporate bankruptcy lawyer, is treating Detroit's financial restructuring as he would a corporate situation.   Continued...

 
A larger banner reading "Outsource to Detroit" is seen on the side of a building on Woodward Ave in downtown Detroit, Michigan, January 7, 2012. REUTERS/Rebecca Cook