‘Bad deal vs. worse deal’
Pensioners to vote on grand bargain; DIA transferred
By Zenobia Jeffries
The Michigan Citizen
DETROIT — Pensioners have less than a month to vote on Emergency Manager Kevyn Orr’s plan of adjustment to cut the city’s debt and get out of bankruptcy.
Ballots were mailed to the city’s 32,0000 pensioners in May, and the deadline to cast their vote on what Orr and supporters call a “grand bargain” is July 11.
Pensioners in both classes, the general retirement system and the police and fire retirement system, have to decide if they will or will not accept the terms of Orr and his bankruptcy consultants’ plan to cut their pensions.
GRS pensioners face up to a 20-percent cut to their pensions under the plan — 4.5 percent to their base pension and 14.5 percent to their annuities for those who retired between 2003-2013. Also, GRS retirees will lose their cost of living adjustments (COLAs).
The stakes are not as great for PFRS retirees whose base pensions will not be cut and face only a one percent cut to their COLAs.
Cuts were made earlier this year to healthcare benefits.
If the plan does not pass, pensioners face deeper cuts, as high as 40 percent or more, says Orr’s spokesperson Bill Nowling.
“There’s really not a protest vote here. If it fails, there are ramifications for deeper cuts if the grand bargain goes away,” Nowling told the Michigan Citizen. “The $816 million on the table is contingent upon their acceptance.”
But accepting the plan means pensioners also give up their right to sue for impairment to their pensions, which are protected by the state’s constitution.
GRS, PFRS, the Retiree Committee, unions and associations representing the city’s retirees have appealed the Bankruptcy Court’s ruling that the city is eligible to file bankruptcy. The appeals are pending before the U.S. Court of Appeals for the Sixth Circuit.
Within a 25-page notice that accompanied the six-page ballot, Orr’s team explains the funds for the plan are only available if the retirees and their representatives dismiss or withdraw their appeals prior to approval of the plan.
The notice states “even if the appellate court decides the city cannot legally reduce your pension, the city’s financial problems mean that it would still not have enough money to make the required pension contributions to the GRS or PFRS. So you would still not be assured of receiving a full payment even if you had a legal right to a full pension.”
What it does not say is the state, according to the Michigan Constitution Article IX, Section 24, would have to cover 100 percent of the pension.
This, pensioners say, is troubling.
“They found a way to go into what we get because they don’t want us to have anything,” said retired city worker Cicely McClellan. “They know one of the lawsuits pending says pensions are protected.”
McClellan called the plan deceitful and a way to circumvent the pension board trustees who have the resources to go to court.
Vera Magee, who worked in the city’s budget department for 33 years, believes pensions should not be cut.
“Any cuts are too much, because it’s my money. We feel we’ve been sold out,” Magee said. “When was the last time you got a ballot and a kicker card telling you how to vote, and a letter from Orr telling you to vote yes. I think they’re trying to push it before the date on the ruling of constitutionality. If you vote yes, then you can’t sue in court to get anything back… (It’s) giving consent to Snyder to take away our pensions.”
Dorthea Harris, who retired from the housing department, said she’s concerned if it is later realized something illegal was done or there were other options, the pensioners will have no recourse if they approve Orr’s plan.
“Another thing is there’s nothing in the plan that locks in the big companies and donors to the grand bargain, so if it fails, then what?” she asked.
The ballot explanation reads: “If the Outside Funding is not paid as promised, the plan does not require the City to make up these amounts.”
“If I vote yes, my yes vote precludes me from being able to challenge (the cuts), to forever forgo my legal right for redress,” says Russ Bellant, who worked as a skills tradesmen for the city and also at the Detroit Water and Sewerage Department.
Bellant and other pensioners believe the lawsuit, now in federal court, challenging emergency management which led to the city’s bankruptcy, will prove victorious. If this happens, and pensioners vote in favor of Orr’s plan they will be stuck with the cuts made under the deal.
“I think the reason they’re doing such a campaign to get people to vote yes is that the bankruptcy won’t be forever and at some point the pensioners are going to say, ‘(Gov.) Snyder, you violated the Michigan constitution.’ They must feel there’s some legal vulnerability,” says Bellant. “I don’t know how many people are willing to give up their right in this regard.”
Shirley Lightsey, president of the Detroit Retired City Employees Association, says the bargain is a “good deal.”
“The retirees are supposed to get the best deal they can,” she said. “(They should) truly think about what they’re doing.”
John Eddings says, “Nobody likes the deal, but it’s a choice between a bad deal and an incredibly worse deal.” Eddings, who worked for the city for 35 years, has already mailed in his “yes” vote. “There’s a feeling of betrayal, a feeling the city is bluffing, but the city is not bluffing. You’re dealing with cold-hearted lawyers. It hurts, but it doesn’t hurt like increasing it seven times,” he says referring to Orr’s threat of more severe cuts if pensioners reject the bargain.
Also problematic, pensioners say, is the fundraising effort required by the plan.
The not-so-grand bargain — or the grand theft as pensioners and some state lawmakers describe Orr’s plan — is contingent upon funding from foundations, corporations and the state of Michigan.
The Detroit Institute of Arts has pledged to raise $100 million for the deal to protect against the sale and seizure of artwork. They’ve reportedly raised 70 percent of the necessary funds. Last week, the Detroit City Council voted 8-0 to transfer the DIA, artwork and assets to a charitable trust to protect it from creditors.
GM, Chrysler and Ford, this week, collectively pledged $26 million to the DIA, as well as two national foundations, New York-based Andrew W. Mellon Foundation and Los Angeles-based J. Paul Getty Trust that pledged a total of $13 million.
Bankruptcy Judge Stephen Rhodes could also not agree to accept the grand bargain. Other creditors have criticized the deal because they say it gives priority to pensioners.
State lawmakers recently passed legislation to contribute $195 million to the fund in a lump sum upon approval of the plan. The nine-bill package also makes provisions for 13 years of financial oversight for the city’s government.
Senator Bert Johnson, D-Highland Park, who voted in favor of the bills, says the pensioners are exposed and the legislation that passed protects them from deeper cuts.
“Looking at what pensioners risk … 45-50 percent of their pensions could completely disappear and folks getting $19,000 (would be) sitting with $9,500,” Johnson said. “That’s nothing something I can stand by and just scoff at.
Johnson says the legislation provides protection of dollars for people who have worked and earned them.
“If the courts reject it that’s fine, (but) any of the dollars decided upon gets spread across to creditors regardless of their class group and the pensioners won’t be protected as they are today because of what we did here in the legislature,” he said.
Senator Coleman Young, D-Detroit voted against the bills.
“The DIA hasn’t raised the money yet to participate in this. How embarrassing would that be if they (can’t come up with the money?),” said Young who also believes the legislation is a “takeover within a takeover.”
“There’s a provision in the legislation that says this financial oversight board has the power of a turnaround commission under the Emergency Manager Law … and says the governor can assign this board any duties he sees fit at time of appointment,” Young said in a telephone interview. “That’s a lot of power for something temporary.”
He added, “The right to vote should not be based on a balance sheet. That’s a fundamental American constitutional right.”
Young referred to mandates in the bills requiring the city to have three years of consecutive balanced budgets.
“If they don’t do those things for 10 consecutive years, the (state appointed) commission will stay indefinitely,” he said.
Ultimately, Young and Rep. David Nathan, D-Detroit, who also voted against the package of bills, say supporting the legislation is a violation of their duty as state lawmakers.
“Our state constitution says pensions should be protected and are protected. Anyone who voted for the bills has violated their oath of office,” Nathan said.
Nathan called the grand bargain a scare tactic and questioned the deal.
“Whose bargain is it? Certainly not the pensioners,” he said. “We have democracy in our cities, states and country. People elect officials because they live where they do. This deal takes away democracy. Not to mention, it’s not good for the pensioners, and is not about the pensioners, but is about everything else — cleaning up the governor’s mess. He’s the one who put the city in bankruptcy and has added the pensioners to the bankruptcy.”
He asks, “Do we honestly know they will receive that type of a cut? This is what he’s saying will happen if they don’t agree with their demands. If (the legislature) didn’t give the money and the pensioners voted yes, where would they get the money?”
Nathan also said he didn’t think the deal was credible because funding was contingent on the legislature.
“Why is everybody trying to get (the pensioners) to give up your right to sue? All these people are asking pensioners to say yes. If this was the greatest deal, we wouldn’t need encouragement to say yes.”
The deal goes before the bankruptcy court judge for approval July 21.