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Detroit bankruptcy pension cuts approved, with only half casting votes

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Detroit employees and retirees vote to accept 4.5% cuts to their pensions as part of bankruptcy plan
About half of those affected by the Detroit pension cuts returned the mailed ballots

Detroit’s current and retired city employees have overwhelmingly voted to support a path out of bankruptcy that will include cuts to their pensions, the city said.

After a two month campaign both for and against the city’s bankruptcy plan, about 73% of the ballots returned from general retirees accepted the plan, as did 83% of ballots from police and fire department employees and their retirees, according to Kurtzman Carson Consultants, the California company in charge of tabulating the ballots.

The so-called Plan of Adjustment asked non-uniform retirees and current employees to accept a 4.5% pension cut, while police and fire employees and retirees will see no cut to their pensions but will lose cost of living adjustments to their pensions.

About half of those affected by the cuts, 15,629, returned the 32,300 ballots that were mailed. 

Though Detroit’s emergency manager, Kevyn Orr, had hinted that the ballots, due July 11, supported the bankruptcy plan, the announcement late Monday allows for Detroit’s so-called Grand Bargain to move forward. The Grand Bargain provides $816 million in public and private funds to shore up pensions while protecting the collections in the Detroit Institute of Arts. It was contingent on retirees accepting the pension cuts.

“I want to thank city retirees and active employees who voted for casting aside the rhetoric and making an informed, positive decision about their future and the future of the city of Detroit,” said Orr, in a statement.

Most retiree groups had advised their members to support the plan, even handing out buttons and signs with the slogans, “You Can't Eat Principles” and “Uncertainty Doesn't Pay the Bills.”

Still, the plan isn’t a done deal yet. Judge Steven Rhodes, who has been handling the trial, will hold a hearing beginning next month to confirm the plan. He can order changes to it as he sees fit.

Though the “yes” vote is a major win for Orr and Michigan Gov. Rick Snyder, who were vilified in protests immediately after the city filed for bankruptcy protection a year ago, the road out of bankruptcy may still be a bumpy one for the city.

A group called Moratorium Now has created a tight network of protesters who have helped draw attention to the water shut-offs in the city and have held weekly meetings about how to stop the pension cuts. They’ve been vocal in protesting clawbacks on retirees pensions; the city mistakenly overpaid retirees in the past and now wants to take money out of pension checks to claim that money back.

“We’ll continue the struggle, against the austerity plan that was really strong-armed into a yes vote,” said Kristen A. Hamel, who is with Moratorium Now. There will be big protests once next month’s trial gets underway, she said. And once retirees begin to see the changes to their paychecks, they’ll get involved, she said.

“Once the impact starts to make itself manifest, it can only inspire people to fight or starve,” she said.

There are few legal options available to those who opposed the bankruptcy plan. As part of the Grand Bargain, retirees were required to drop all lawsuits against the city. One had contended that pensions are protected under the Michigan Constitution and that the city had no right to impair them.

Last week, dozens of retirees and current employees spoke in court before Rhodes as part of a daylong hearing he had scheduled to listen to objections to the bankruptcy. Some of the people who spoke then hope their words will stay with Rhodes and motivate him to spare retirees the brunt of pension cuts.

Rita Dickerson was one of those who spoke last week. She retired in 2005, and said, in a handwritten letter to Rhodes, that she was diagnosed with cancer last year and that along with the illness, “I have to deal with the psychological stress, the anger, the feeling of being a pawn, the hopelessness, and yes, despair that I feel.”

On Tuesday, after the results of the vote were revealed, Dickerson said that she had been impressed with Rhodes during the hearing and that she hoped he would remember her when he makes his decision about the bankruptcy.

“I’m hoping that during the confirmation hearing he will keep all of the things that we said in mind and that he won’t enact the plan exactly as it was presented to us,” he said.

Two other creditors, Syncora Guarantee Inc. and Financial Guaranty Insurance Co., rejected the plan.

Follow @AlanaSemuels on Twitter for national news.

 

Copyright © 2014, Los Angeles Times
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Retirement PlanningPensionsFinancially Distressed CompaniesPoliticsBankruptcyPension and WelfareInterior Policy
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