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Friday, February 21, 2014

Detroit EM Kevyn Orr Files Third Bankruptcy Adjustment Plan, Unions Vow to Continue Fighting for Pensioners

Photo Credit - TheStar.com

Detroit Appointed Emergency Manager Kevyn Orr filed the City's Third Plan of Adjustment and Disclosure Statement with the Eastern District of Michigan United States Bankruptcy Court, February 21.

The City's Bankruptcy Disclosure Statement cites $1.5 billion is proposed for investment in Detroit, over a 10 year period.

"
The Plan also 
allows for critical and meaningful investment in the City of approximately $1.5 billion over ten years in order to, among 
other things: (1) provide (and improve) basic, essential services to City residents; (2) attract new residents and businesses 
to foster growth and redevelopment; (3) reduce crime; (4) demolish blighted and dangerous properties; (5) provide 
functional streetlights that are aligned with the current population footprint; (6) improve information technology systems, 
thereby increasing efficiency and decreasing costs; and (7) otherwise set the City on a path toward a better future," the Adjustment Plan notes.
Under the Proposed Adjustment Plan, City of Detroit Retirees and Workers will face at least a 34% reduction in monthly annuity income under the 'GRS Adjusted Pension Amount'. The average City of Detroit retiree receiving $1500 monthly annuity pension under the plan, will face a $510 a month deduction or $6,120 for the year.  
"GRS Adjusted Pension Amount" means, with respect to a Holder of a GRS Pension Claim, the Current Accrued Annual Pension payable to such Holder as adjusted in accordance with the following formula: (a) for such a Holder who is either retired and receiving a monthly pension or a surviving beneficiary, a 34% reduction in the monthly pension amount and;" stated in the Plan of Adjustment proposed by E.M. Orr.  
"(b) for such a Holder who is an Active Employee, a 34% reduction in the monthly pension amount; provided that, with respect to Holders who are Active Employees, in the event the unfunded liabilities of the GRS for the plan year ending June 30, 2014 are greater than the unfunded liabilities of the GRS as of June 30, 2013, the reduction in the monthly pension amount shall be increased to the extent necessary to ensure that there is no change in the amount of the underfunding between Fiscal Years 2013 and 2014."
Retiree medical benefits will be managed under a Detroit Voluntary Employee Beneficiary Association (VEBA) plan, governed by an appointed Board of Trustees
"On or as soon as practicable following the Effective Date, the City will establish the Detroit VEBA to provide health care, life and other legally authorized welfare benefits to Detroit VEBA Beneficiaries and certain of their dependents and future City retirees," Detroit's Bankruptcy Plan of Adjustment cites. "The Detroit VEBA will be governed by a board of trustees that will be responsible for, among other things, management of property held by the Detroit VEBA, administration of the Detroit VEBA and determination of the level of and distribution of benefits to Detroit VEBA Beneficiaries."
American Federation of State, County, and Municipal Employees Council 25 President Al Garrett, representing over half of Detroit's Retirees and City Workers, in a statement said Orr's Bankruptcy Proposed Plan of Adjustment amounts to a 'gut punch' for city workers and retirees. 
"The proposed plan of adjustment is a gut punch to Detroit city workers and retirees," said AFSCME Council 25 President Garrett. "The plan essentially eliminates health care benefits for retirees and drastically cuts earned pension benefits.   Retires cannot survive these huge cuts to the pensions they earned. The plan is unfair and unacceptable."
Garrett said AFSCME Council 25 Union would "fight for a more just result."

Detroit's Appointed Emergency Manager Kevyn Orr in a statement, restructuring advising firms including Jones Day, were Orr was a former partner before Attorney's appointment as E.M.,Miller Buckfire & Co., Ernst & Young and Conway MacKenzie Inc. are 'satisfied with the progress made thus far.'

"My advisers and I have now expended many months in negotiations, including within Bankruptcy Court-mandated mediations, with all classes of creditors to get to this point, and we are satisfied with the progress made thus far," Orr said in a statement. "However, there is still much work in front of all of us to continue the recovery from a decades-long downward spiral. We must move swiftly to emerge from bankruptcy so that the financial distress harming the City can end."
One of Conway MacKenzie's consultants on Detroit's Bankruptcy Restructuring Plan of Adjustment includes former state treasurer Andy Dillon, who recommended Detroit for emergency management in March of last year.

Michigan Governor Rick Snyder, who employed former State Treasurer Dillon as a State Consultant for four months after Dillon retirement in the Treasurer position, called Detroit's Emergency Manager Orr's plan "a thoughtful, comprehensive blueprint" to 'fully revitalize Detroit.'

“Detroit’s comeback is underway. Emergency Manager Kevyn Orr has submitted a thoughtful, comprehensive blueprint directing the city back to solid financial ground, a crucial step toward a fully revitalized Detroit," Snyder said in a statement. "There will be difficult decisions and challenges for all sides as this process moves forward."
Detroit's Bankruptcy Plan Disclosure Statement.

Detroit's Third Bankruptcy Plan of Adjustment.

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