Sell off DWSD, save cuts to pensions
Orr, retirees reach deal pending vote
By T. Kelly
The Michigan Citizen
DETROIT — Negotiators for Emergency Manager Kevyn Orr and the police and fire retirees reached an agreement April 15 that now needs a vote of two-thirds of the retirees before it can be presented to bankruptcy Judge Steven Rhodes.
Under the terms of the deal, the pensions of the civilian retirees will be cut 4.5 percent with no cost of living increases, sources say.
Police and fire retirees will take no cuts but receive only a one percent annual cost of living adjustment.
The cuts are less than what were originally proposed by Orr. If the city’s finances improve, reductions could be less severe.
Also, the settlement depends upon the legislature’s approval of the “grand bargain.” That is the plan calling for the state to contribute $350 million from the tobacco settlement funds to the city over 20 years. The state contributions will match $465 million from foundations who, in exchange, will take the DIA from the city and give it to an authority. The total $815 million “grand bargain” will go to soften the blow retirees will experience and save the art at the DIA.
As talk of the police and fire deal circulated, there was talk among activists of a pension proposal offered at a Wayne State University forum April 8, “Detroit Bankruptcy and Beyond: Organizing for Change in Distressed Communities.”
In discussing the loss retirees are facing, Joseph Recchie, CEO of Praxia Partners offered what he said was a “sustainable and equitable solution hiding in plain sight. Detroit should transfer ownership of its water and sewer utilities to an entity benefiting pensioners. Utility revenue would pay down debt and fund future pensions,” Recchie said.
Take the city’s most valuable asset, its water and sewer utility to protect the livelihoods of its former and present workers, he said, while building a sustainable future for the city.
“Our recommendation is that the city transfers ownership of its water and sewer utility over to pensioners and allows the utility revenue to pay down pension debt and pay for future pension funding,” Recchie said.
He explained the water and sewer utility has been estimated to be worth $1.9 billion over 40 years to the city. While the water and sewer utilities carry outstanding debt totaling $5.74 billion, together they have brought a 20 percent return at about $550 million annually.
Orr has proposed privatization of the water and sewerage department by either selling or leasing the system and its management to a private firm and is requesting proposals from companies and wants to deal by June 1.
Orr also proposed selling the utility to a newly-formed regional Great Lakes Water Authority.
He has been attempting to create a Great Lakes Water Authority composed of Detroit and surrounding municipalities to take on the debt and pay the city as it operates the plants. However, suburban politicians have publicly opposed the idea.
Recchie said his proposal addresses the need to fulfill commitments made to public servants — past, present, and future — while dealing with the debt.