June 4, 2014 at 11:17 pm

Gov tries to seal bankruptcy deal with Detroit retirees

Governor Rick Snyder answers questions about the g...
Governor Rick Snyder answers questions about the g...: Governor Rick Snyder spoke with The Detroit News, answering questions about the historic passage of $195M state aid package for Detroit

Detroit — With state aid for city pensioners in hand, Gov. Rick Snyder is urging Detroit’s retired and active workers to approve a plan to limit cuts to their benefits and settle the city’s bankruptcy.

“I really encourage the retirees, the creditors to vote yes on this,” Snyder told The Detroit News editorial board Wednesday. “It’s a win for them, it’s a win for the city, it’s a win for all of us.”

One day after the state Legislature approved $195 million in aid for Detroit pensioners, Snyder made a full-court press Wednesday to urge some 32,000 vested city pensioners to agree to reductions in their pensions and health care benefits before the July 11 voting deadline.

Snyder’s renewed push for a consensual resolution to the nation’s largest municipal bankruptcy came as some retired first responders voiced opposition and unease with the plan Wednesday.

Kevin Kemp and several hundred other members of the Police and Fire Retirement System packed a Detroit union hall Wednesday afternoon to hear details about the city’s debt-cutting plan, which the pension fund’s board has not fully endorsed.

Under the plan, the basic pension for police officers and firefighters will not be cut, but their annual inflationary raise will be sliced from 2.25 percent to 1 percent.

“I didn’t accept any cuts,” said Kevin Kemp, a 27-year retired police officer who voted against the city’s plan when it arrived in the mail last month. “I worked for my pension, I earned my pension, I should be paid my pension.”

Retired firefighter Willie Sutton said he intends to vote yes. He’s afraid of what the outcome will be otherwise.

“If you vote no, it goes to an alternative plan,” said Sutton, 68, who served 26 years. “In that case, we’ll definitely lose a lot of money.”

Snyder urged leaders of retiree groups, the city’s pension funds and labor unions to become more vocal in their support of the plan, arguing they “would have the most positive influence in getting people to vote yes.”

“I don’t believe I’m the best advocate,” Snyder said in an interview with The News.

But at the police and firefighters’ meeting, one potential advocate, pension trustee Louis Sinagra, told the audience he’s personally not ready to vote.

“I’m still gathering information myself. At some point I will make that decision, but it’s not something I would put forward to a member to say I would vote one way or another, at least not at this time,” Sinagra said. “It’s up to a member, once we give you the information, to make your decision.”

The so-called “grand bargain” combines $195 million in state tax dollars with $466 million in private funds to prevent pensioners from facing double-digit percentage reductions in their monthly lifetime benefits.

Non-uniform general city retirees face a base cut of 4.5 percent if they approve the plan and a 27 percent reduction if they reject the deal. Under both scenarios, their pension reductions could be larger through elimination of inflationary increases and the city’s attempt to recoup excess interest earnings paid out to workers through a separate annuity savings plan.

Those additional cuts vary among the 20,200 members of the General Retirement System, which is holding meetings for its members today at 10 a.m. and 2 p.m. at Fellowship Chapel, 7707 W. Outer Drive.

If either of the two classes of pensioners reject the deal, Snyder said, “basically the grand bargain goes away.”

“So they’re faced with the consequence of having fairly large cuts to their benefits,” Snyder said in a conference call with reporters. “This shouldn’t be used as a political protest to vote no.”

As she prepared to leave the police and fire meeting, retired Detroit police officer Cynthian Moreland said she’s still on the fence.

“I’m leaning more toward it,” Moreland said. “A little bit of something is better than a whole lot of nothing.”

Snyder also had a message Wednesday for other distressed municipalities that might ask the state for cash to solve their problems.

“I expect people to ask, but the answer is no,” Snyder told The News.

Snyder does not expect the historic Detroit bankruptcy and pension rescue package to set a precedent for other struggling communities in Michigan. The public-private partnership that raised $466 million to soften retiree pension cuts and shield city-owned art from creditors is unique and unprecedented, Snyder said.

But there are signs of trouble in other Michigan cities. Wayne County is wrestling a $175 million budget deficit and underfunded pensions.

The News reported last month the emergency manager in Flint is contemplating bankruptcy if the city loses a court battle over retiree health insurance benefits, a $900 million liability for the once prosperous Genesee County city.

State Sen. Pat Colbeck, who voted Tuesday against state aid for Detroit pensioners, warned that other cities may soon be in line at the Capitol seeking a “bailout.”

“How we respond to the Detroit bankruptcy will set precedent for how the state addresses future (municipal) bankruptcies,” the Canton Republican said Tuesday. “Flint, Highland Park and Wayne County are among the municipalities that are in serious financial trouble. They are next in line for whatever state bankruptcy policy we establish in the resolution of the Detroit bankruptcy.”

Colbeck added: “Are we going to dip into the rainy day fund to bail out all of these communities?”

Snyder plans to sign the nine-bill Detroit bankruptcy package this week. The bills tap the state’s $580 million rainy day fund to pay for the $194.8 million one-time contribution to Detroit’s two pension funds.

State Sen. Jack Brandenburg, who also voted against the Detroit pension aid, has called into question claims the state would be on the hook for Detroit’s estimated $3.5 billion pension liability.

Brandenburg asked Attorney General Bill Schuette last week for an official opinion on whether “the State of Michigan has any obligation under Michigan law or constitution to pay any deficiencies in pension benefits to retirees of a bankrupt municipality.”

Schuette has vowed to fight cuts to pensions if retirees reject the deal. But in a court paper filed last week with the 6th Circuit Court of Appeals, Schuette argued it’s “the city alone, not the state or its taxpayers, that bears this obligation” to pay pensions.


Gov. Rick Snyder addressed Detroit's 'grand bargain' during a meeting with The Detroit News editorial board on Wednesday. / Max Ortiz / The Detroit News