Live tweets: Obama official lauds retiree deal in Detroit bankruptcy trial
Detroit — An agreement to reduce pensions and heath plans for Detroit’s retirees was hard-fought and will be painful, but is appropriate for the good of revitalizing the city, an adviser in the city’s historic bankruptcy case said Wednesday.
Ron Bloom, the former “auto czar” for President Barack Obama’s Task Force on the Automotive Industry, spent nearly an hour testifying before U.S. Bankruptcy Judge Steven Rhodes about his role with the committee representing the city’s retirees.
Bloom stressed the committee initially had a “vigorous disagreement” with the plan put forward by the city — and that an eventual agreement didn’t come easy.
“We took the position that the city didn’t belong in bankruptcy court at all,” said Bloom, adding the committee took the position that pensions were constitutionally protected and retiree health care changes were “inappropriate” and “not consistent with the law.”
He added: “We had pretty serious disagreement from where the city started and where we started.”
Bloom, who oversaw the bankruptcy restructurings at General Motors and Chrysler during the great recession, said the committee was focused on advocating for retiree health care and pensions.
Early on, he added, they concluded that pensions would be a priority, and while health care changes were “very painful,” there was a better legal and emotional argument connected to pensions.
The committee had sued the city over the constitutionality of altering pensions and benefits. But the claim is to be abandoned, pending Rhodes’ confirmation of Detroit’s plan to shed $7 billion in debt.
Bloom said it was self-evident that Detroit was in a long-term decline. Like it or not, the Retiree Committee was “betting on the city” and had to believe revitalization would occur, he said.
“At the end of the day, we were relying on the city of Detroit to be there to honor these choices out in the future,” he added. “ If the city continued in long-term decline, the revised promises it made would be challenged. Not as a legal matter, but as a financial matter.”
Bloom noted commitments from the state and stakeholders in Detroit’s reinvestment efforts. The committee had “a keen interest in revitalization as well,” he added.
“Being on the wrong side of revitalization is just not a place that would get us where we need to go,” he testified.
Detroit’s Water and Sewerage Department and the proposal for a regional water authority also were the focus of testimony Wednesday.
DWSD Director Sue McCormick testified about planned capital improvements, characterized the city’s water system as “award-winning” and added that its sewer system is “really doing quite well.”
McCormick estimated an average of $100 million per year would be spent for both water and sewer system upgrades over the next decade.
She faced questioning from Rhodes over what portion of those capital repairs would be funded through borrowing. McCormick could not offer a figure.
Rhodes also asked McCormick to weigh in on the water authority plan and its impact on DWSD operations and ability to provide services.
“I generally see it as a positive,” she said, adding the plan is “a very good solution” to assist Detroit in its capital needs and the region in setting up the water authority.
Rhodes then pointed to the “lack of confidence” from some customers and communities about the department’s ability to carry out its mission efficiently.
“There is an undeniable history,” McCormick said, adding she was not a part of it. The department’s governance board has established integrity, and the authority would provide an additional level, she said.
Earlier Wednesday, Rhodes ruled that an evidentiary hearing will be held Monday on a request that asks the judge halt Detroit’s controversial water shut-offs.
Attorney Alice Jennings asked Rhodes earlier this month for a restraining order to stop shut-offs until the city improved its communication with residential customers with medical emergencies. Jennings represents roughly 10 water customers fighting the shut-offs.
Rhodes initially delayed a decision and ordered the groups to mediation with Detroit officials. Since then, the regional water authority plan was announced which, if passed, would include $4.5 million in aid for people in Detroit and throughout southeastern Michigan who can’t afford to pay their water bills.
Also Wednesday, Rhodes issued an order adjourning the trial for 10 days starting Friday, while objecting creditors review the city’s newest version of its bankruptcy exit plan.
The new plan follows an agreement hammered out over the weekend between the city and its largest holdout creditor, bond insurer Syncora Guaranty Co.
Suzanne Taranto of the actuarial firm Milliman, was third to testify Wednesday. She studied obligations accociated with the city’s medical plan.
Staff writer Steve Pardo contributed.