Brandy Baker / The Detroit News)
Detroit’s grand bargain is one step closer to becoming reality, but Gov. Rick Snyder is not the guy to close the deal.
“I don’t believe I’m the best advocate,” the governor told The Detroit News Wednesday, one day after the state Senate approved a $195 million rescue package as part of a $816 million fund also financed by a dozen foundations and donors to the Detroit Institute of Arts. He’s right about that.
If not Snyder, whose administration joined fellow Republicans in the Legislature to sharpen an emergency manager law that culminated in Detroit’s Chapter 9 bankruptcy, then who has the credibility to help sell wary pensioners on their best hope this side of an ugly cramdown by U.S. Bankruptcy Judge Steven Rhodes?
Trustees of the city’s two pension funds have yet to publicly endorse the deal, despite urging from their outside financial consultants. The city’s largest unions are slow-walking their endorsement. Emergency Manager Kevyn Orr’s motivations, by definition, are considered suspect. Mayor Mike Duggan and the City Council are bystanders, not architects, of a process that could leave them the cleanest municipal balance sheet in more than two generations.
At a time crying out for critical leadership — when the city’s retirees will decide between the public-private grand bargain and an undetermined Plan B likely to be much harder on them — would “the best advocate” for an unprecedented deal spelling the difference between something close to the retirement earned and a retirement teetering at or below the poverty line please step forward.
The stakes are enormous. The city’s two classes of pensioners — public safety and general retirement system members — between now and July 11 will decide whether the so-called grand bargain brokered by Chief U.S. District Judge Gerald Rosen will be the cornerstone of a restructuring plan set for trial less than two weeks later. Or whether the efforts of Rosen and his team of federal mediators will fall short of their audacious goal to exchange a rescue of the DIA’s collection for cash to bolster pensions.
Rosen did his job. The foundations and DIA donors pledged to do theirs. Republicans and Democrats in the Legislature overcame skepticism from the left and threats from the right to do theirs. Now, with the Detroit rescue package headed to the governor’s desk, it’s the turn of pension fund trustees and union leaders to heed the counsel of their financial advisers and recommend a “yes” vote to their members — not because it’s perfect, which it isn’t, but because it’s the best they’re going to get.
“It’s a win for them, for the city,” Snyder said, adding that he plans to openly urge pensioners to vote yes. “The grand bargain is the best opportunity for them.”
However maddening and unfair that may be to retirees, however much missed pension payments by the city were exacerbated by bad financial decisions courtesy of pension board members now gone, that’s the reality of bankruptcy. It offers a deal of some kind which, if spurned, seldom gets any better, particularly for unsecured creditors with finite resources and dwindling patience.
Wednesday, trustees of the police and fire pension fund held a town hall attended by hundreds of pensioners in person or online. They expressed concerns about the complexity of the ballots and noted the fact that the state’s portion wasn’t effectively sealed until Tuesday. But the fund’s trustees are not expected to consider any endorsement of the Plan of Adjustment — namely, the grand bargain — until their June 12 meeting, at the earliest.
“It was very, very constructive,” said Bruce Babiarz, spokesman for the Detroit Police and Fire Retirement System. “The message is out that this is the settlement on the table and that Plan B would be much, much worse.”
Proving it is another matter entirely. No sane pension fund trustee or union leader would be eager to tell his or her members that the deals cut on their behalf cannot withstand the blunt force of Chapter 9; that the state constitutional guarantee of vested pensions can be breached in federal bankruptcy, as Rhodes ruled; that one reason many members of the general retirement system stand to lose more of their annuity payments is that (former) trustees issued 13th checks even when the fund lost money.
The general retirement system’s trustees are set to meet and hold their own town hall, too, making this week a potentially seminal one in the path of the grand bargain, from mediator Eugene Driker’s dining room several months ago to its confirmation sometime later this summer or early fall. But getting there, despite an act of the Legislature, is not assured.
Asked Wednesday what hurdles remain to achieving an allegedly fresh start for the city, Snyder named two things: the balloting by two classes of retirees and the confirmation trial scheduled to begin July 24. If the grand bargain fails to survive the balloting, Detroit’s historic bankruptcy will morph into an epic blame game with no winners, especially on the home team.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays.