Retiree group seeks appeal of Detroit pension cuts
In approving Detroit’s modest reductions to most city pensions earlier this month, U.S. Bankruptcy Judge Steven Rhodes said there was a 25 percent chance his ruling could be overturned on appeal.
A group of 133 holdout Detroit pensioners likes its chances.
Late Monday, the pensioners asked the judge to halt implementation of Detroit’s pension cuts pending their appeal to a higher court.
In a court filing, the group of retirees, survivors and city workers cited the 4-to-1 odds the Denver Broncos will win Super Bowl XLIX on Feb. 1 as part of their justification for time to appeal.
“Therefore, there is a reasonable likelihood of prevailing on the merits,” retired Detroit police officer and attorney Jamie S. Fields wrote in court motion for a limited stay of Rhodes’ ruling.
The appellants asked for a limited stay that wouldn’t impact other settlements tied to Detroit’s plan to fix city services and shed $7 billion in debt.
Fields, who retired in 2010 as a deputy police chief, argued Detroit should not be able “to avoid any meaningful appellate review of the unprecedented approach” used to forge settlements with labor unions, retiree groups, the city’s pension funds and financial creditors.
Rhodes has not yet set a date for Detroit’s exit from bankruptcy to become effective, though city officials expect it to happen in mid-December. But once he does, the city can begin imposing its plan to reduce general retiree pensions by a minimum 4.5 percent and shave cost-of-living adjustments for retired police officers and firefighters from 2.25 percent to about 1 percent.
Detroit “will suffer no harm” in delaying the pension cuts because no money is coming from Detroit’s general fund for pensions until 2023, Fields said.
Under the so-called “grand bargain,” philanthropic foundations, the state of Michigan and private companies are pumping the equivalent of $816 million into the pension funds over 20 years in exchange for shielding city-owned art from being auctioned off.
In July, pensioners in both the General Retirement System and Police and Fire Retirement System voted in favor of the city’s plan, which includes deeper cuts for some GRS members who received excess interest earnings on an optional savings account.
Emergency Manager Kevyn Orr and Gov. Rick Snyder warned retirees at the time that they could face double-digit pension cuts and the grand bargain money would go away if they didn’t approve the plan.
“They scared retirees and they got people to vote overwhelmingly ‘yes’ because they were scared they would take a bigger cut,” Fields said Tuesday in an interview.
In his Nov. 7 ruling from the bench, Rhodes acknowledged the pension reductions could be a “real hardship” for some retirees.
“The pension reductions in the pension settlement are minor compared to any reasonably foreseeable outcome for these creditors without the pension settlement and the grand bargain,” Rhodes said.