By Ed Mendel
July 28, 2014
Bankrupt Detroit announced last week that current workers and retirees voted overwhelmingly to cut many pensions by 4.5 percent and to trim or eliminate cost-of-living adjustments.
If the plan to exit bankruptcy had been rejected, a federal judge might have imposed a proposed 27 percent pension cut, and a $816 million contribution to offset pension cuts would not be made by foundations, the state and art donors.
“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,” the Detroit emergency manager, Kevyn Orr, said in a news release.
Retirees in a much smaller bankrupt city, Central Falls, Rhode Island, population 19,000, voted in 2011 to accept pension cuts of up to 55 percent, reduced for the first five years by a state supplement.
In California, pension debt is an unresolved issue in two cities that declared bankruptcy in 2012 about five weeks apart — Stockton on June 28 and San Bernardino on Aug. 1.
But the state law in California and the financial pressure on the two cities, both members of the California Public Employees Retirement System, are different from the situations in Detroit and Central Falls.
Only 27 states have laws authorizing municipal bankruptcies, a Pew Charitable Trusts report said last July. Two states, Georgia and Iowa, prohibit bankruptcies, and the rest have no law authorizing or prohibiting bankruptcies.
Michigan Gov. Rick Snyder appointed an emergency manager for Detroit finances, Orr, who proposed a 27 percent pension cut. A court-appointed Central Falls receiver, Robert Flanders, proposed pension cuts of up to 55 percent.
Elected city councils still control Stockton and San Bernardino finances. Stockton does not want to cut pensions, saying they are needed for recruitment. San Bernardino has only publicly proposed stretching out pension-debt payments to reduce short-term costs.
In addition to outside control, Detroit and Central Falls also received outside financial aid that reduced the amount of the pension cuts active and retired employees were asked to approve.
The $816 million Detroit “grand bargain” reduced pension cuts and avoided the sale of the city’s world-class art collection. Private foundations provide $366 million, the state of Michigan $350 million, and Detroit Institute of Arts donors $100 million.
The Central Falls pension cut of up to 55 percent is reduced during the first five years by several million dollars from the state of Rhode Island. Police and firefighters get 75 percent of their original pensions. Pensions of $10,000 a year or less are not cut.
“In many states, the difficulties of major cities such as Stockton and San Bernardino would mobilize the state government to intervene and help them recover,” the Pew report said last year. “But California offered no such aid, because it has long adhered to the belief that its cities should operate independently from the state.”
To read entire column, click here.
An interesting fact came out of the courtroom yesterday.
Detroit is a “Right to work” city. The result has been the people that live there are now making half of the average pay that the rest of the country is making.
Further, since the water company has partnered with a for profit corporation, the water bill has risen to twice the average water bill the rest of the country is paying.
What’s happening right now is entire city blocks are having the water turned off because the majority of customers can not pay their bills.
Go find the court docs, the average bills are approaching 200 – 300 a month.
Further, the water board is meeting this week to request to the governor for permission to raise the water rates yet again. He’ll rubber stamp it as he always has.
Here’s the interesting thing.
The reason a judge ordered this private collection agency from shutting off water to residents; The UN made an appearance and testified that even in the most doctorial parts of South Africa, water is not shut off to people. People die without water. It is one of the first UN human rights.
It’s so bad that Canada is bringing water trucks with water so people in these neighborhoods can have clean water to drink.
You really should read as much of this story from as many resources as possible to see what your brethren Republicans do to tier own people in order to enrich their corporate masters.
Corporate masters you ask? Proof you ask?
Pretty much all of the major corporations in that area owe millions of dollars in water bills….. not even a whisper that the water company will collect or turn their water off. (As long as they keep contributing to their republican stooge)
Just do away with 3@50 for Safety and every city and county pension would never have a funding issue. That, or redefine “compensation” not to include every benefit. That would be tough given the Ventura decision.