Wayne County settles lawsuit over retiree health care
Detroit — Wayne County Executive Warren Evans said Wednesday a settlement in a lawsuit filed by retirees will save the county about $20 million a year.
The settlement is Evans' latest effort to shrink the county's $52 million structural deficit. Adding to the deficit, the county has taken about $20 million from its general fund each year to help bolster its pension system.
"What this agreement does is bring forth a resolution that I think is best for the county and allows retirees to keep and maintain access to health care," Evans said at a news conference Wednesday morning at his office in downtown Detroit.
"And obviously, it makes a big dent in the structural deficit. We have a long way to go, but I think we're halfway home."
Once implemented, he said, the deal will reduce the county's annual health care costs for these retirees from about $30 million to $10 million.
Bruce Miller, the attorney who represented the county's retirees in the lawsuit, said his clients faced a grim situation.
"The retirees here were the victim of (former Wayne County Executive) Bob Ficano's waste of public assets," Miller said. "And the county was threatening to cut off all retiree health care. We put together a deal that gives retirees lifetime security — at a much lower level, of course — but has provisions for improvement over time as county finances improve."
Miller also said "we must have done something right because the retiree organization voted unanimously to approve the deal."
The lawsuit was filed in Wayne County Circuit Court more than five years ago by retirees whose service ended before Dec. 1, 1990. Evans estimates the suit cost the county more than $3 million in legal fees.
They sued the county, claiming it wrongfully reduced their health care benefits. But the county argued it had the right to reduce — even eliminate — their health care benefits.
"If we didn't come to a settlement, we would probably be litigating this case for another four or five years," Evans said. "If the county would have lost, its exposure would have been in the tens of millions in damages and hundreds of millions more in future health care obligations."
Evans said the deal affects about 5,000 retirees whose benefits changed in October 2009.
About 80 percent of those retirees are eligible for Medicare. Under the deal, those retirees will get a monthly $130 stipend from the county to buy supplemental Medicare health insurance for themselves and their spouses, he said.
The other 20 percent of the retirees will also get a monthly stipend, but it will be based on their income. Those retirees will be able to use the stipend to buy health insurance on the national exchange under the Affordable Care Act.
Evans said he hopes to have the agreement in place by October, the start of the next fiscal year. The court and the Wayne County Commission still have to approve the agreement, he said.
Since taking office in January, Evans has also consolidated three departments and a division, and implemented a countywide spending and hiring freeze. In April, he presented a recovery plan that aims to cut $230 million from the county's budget over four years.
Also Wednesday, Evans said the county has reached a deal with its care management organizations, which provide human services, such as child care. The agreement will save the county's general fund about $2.25 million a year.
In addition, he said the county has reached new agreements to preserve its Meals on Wheels program and its family shelter in Westland while saving the county about $1 million a year.
Meanwhile, Evans said he expects summer tax bills to go out to residents soon with a one-time additional tax to enable the county to make a court-ordered $49 million payment into a county retirement fund.
On Friday, Evans vetoed a County Commission resolution to tap into the delinquent tax revolving fund to pay the judgment.
The judgment would have cost the average owner of a $100,000 home an extra, one-time $62 on the summer tax bill, officials said.
However, using contributions from various departments to pay part of the judgment, the county has been able to reduce the amount to be levied to $39 million. As a result, the one-time additional tax will cost the average owner of a $100,000 home an extra $48.
Also Wednesday, Evans discussed the possible sale of the Guardian Building, which houses his office, the county commission and several other county departments.
On Tuesday, officials said the county is seeking a real estate agent to sell the building as well as the First Street Parking Deck and an office building at 511 Woodward.