Detroit— A politically connected lawyer and close associate of former Mayor Coleman Young will help manage a trust overseeing health care benefits for retired Detroit workers if a federal judge approves the city’s debt-cutting plan.
Mayor Mike Duggan tapped campaign donor and insider Floyd Allen to serve on the health care trust for non-uniform city retirees. The trust is one of two funds financed with $450 million from the city to bankroll health care benefits under Detroit’s debt-cutting plan.
The funds — called a voluntary employee beneficiary association, or VEBA — are a key component of the debt-cutting plan and would help the city get out from under its $4.3 billion retiree health care liability. U.S. Bankruptcy Judge Steven Rhodes will determine if the city’s plan is feasible during a trial that starts Sept. 2.
Allen was a personnel and labor relations director in Young’s administration before leaving in the late 1980s. Young later gave the lawyer city contracts worth at least $300,000 to consult on labor matters — a controversial move labeled an act of patronage by then-Councilman Jack Kelley.
Allen has close ties to Duggan, too. He served as general counsel at Detroit Medical Center from 2004 to 2012, coinciding with Duggan’s tenure as chief executive.
He contributed $3,400 to Duggan’s successful mayoral campaign in 2012, according to Wayne County campaign finance records.
Duggan called Allen the right man to lead the operation, citing his long history as an attorney and in labor relations.
“He’s somebody with great integrity and we have a great expectation that he will lead the reforms,” Duggan said.
Allen previously worked for Detroit Public Schools “rooting out public corruption,” said Eric Foster, a West Bloomfield-based consultant and political observer.
“He has a history of being above board, honest and credible,” Foster said, adding that Allen’s contributions to Duggan’s campaign were “very small in the grand scheme of the major operation.”
Allen could not be reached for comment. He heads a boutique corporate defense firm in Detroit. Previously, he managed human resources and labor relations at Ford Motor Co.
Allen’s four-year appointment surfaced late Wednesday in the city's new plan to shed about $7 billion debt and emerge from bankruptcy court.
Duggan gets to appoint one trustee to a seven-member board that will manage money contributed by the city for retiree health care benefits. Six members will be appointed by retiree groups — including Thomas Sheehan, chairman of the Detroit General pension fund.
Each trustee will receive $12,000 annually for the next two years before payment is cut in half. Members can, however, approve a raise but the stipend cannot exceed $12,000.
“The (Detroit General pension fund) has no control over who Mayor Duggan appoints to the VEBA Board or any other position, however, Floyd Allen is an outstanding professional with many years of public service and should be a welcome addition to any board he serves on,” retirement system spokeswoman Tina Bassett said Thursday.
The health care trust is one layer of oversight included in Detroit’s debt-cutting plan.
A nine-member Financial Review Commission, dominated by state government appointees, will have veto power over city contracts exceeding $750,000 and could remain active for at least the first three years after Detroit exits bankruptcy.
The plan also for the first time provided for the possibility of Detroit spinning off the Detroit Water and Sewerage Department to a regional authority.
The city and various parties are engaged in talks overseen by federal mediators. The News reported Monday that the suburbs and Detroit are finalizing a deal to turn over ownership and operation of the utility to a regional authority.
In exchange for acquiring DWSD and its assets, the authority would pay Detroit $50 million a year for 40 years.
U.S. District Judge Sean Cox, who is overseeing negotiations, said a deal was not imminent and that negotiations do not include payments to the city’s general fund.