Thursday, June 20, 2013

Bankers Plot to Seize Detroit Pension Funds

PANW Editor's Note: Detroit municipal retirees should be angry. There are state statues that guarantee pensions yet the bank agent Kevyn Orr is threatening to take the city into bankruptcy court in order create the conditions for the seizure of city assets including the $US6 billion pension funds.

The workers and residents of the city must fight this attempted bank-engineered expropriation. People in the city should come out in defense of the workers and retirees. There should be no yielding on the ownership of city assets including the Water and Sewage system, the Detroit Institute of Arts, the Detroit Zoo, Belle Isle, Public Lighting, the DDOT bus system, trash collection, etc., all of which belong to residents of the city.

Any program aimed at ending emergency management must focus on the role of the banks in the crisis. Orr wants to investigate the pension boards but has said nothing about the major banks which hold Detroit's debt.

The bankers created the crisis and it is they who must pay for it. Workers and retirees must maintain their pensions, healthcare and all other benefits.

Abayomi Azikiwe
Editor, Pan-African News Wire
--------------------------------------------

June 20, 2013 at 10:18 am

Detroit retirees angry, anxious over EM's pension proposals

Brian J. O’Connor
Detroit News Finance Editor

Gerald Kent is insulted. William Schultheis is upset. Roger Doppelberger is indignant.

And along with 20,000 other city of Detroit retirees, they’re worried.

When Detroit’s emergency manager meets with unions and pension boards today, he’ll discuss how the city can cut its costs for retiree health care. But retired city workers fear that the budget ax will bite into their pensions, too.

Take Kent, who worked in the city’s Building and Safety Engineering Department as an inspector from 1997 until his retirement in December 2011. Now living in Southfield, Kent says that after generating nearly $30 million in fees and fines through his work, his pension is about 38 percent of his final salary.

“That pays for not only me, but about five others, benefits and pension,” Kent wrote in an email to The News. “I kept my promise to serve the city of my birth, to uphold the laws and codes honestly. To ask me to accept a cut in my pension is an insult to the years of good service I provided.”

Schultheis, 84, retired from the Detroit Public Lighting Commission in the early 1980s after 31 years of working as a lineman, and notes that he doesn’t have a lot to cut. Like more than a third of others getting city pension payments, his annual benefit is about $15,000, or $1,300 a month.

“That’s not a whole hell of a lot,” the Grosse Ile resident said.

And for Doppelberger, a city water worker who retired to Lexington, Mich., last year, a promise should be a promise.

“Why should I take any cut?” the 52-year-old asks. “This is what we agreed upon when I checked out, this is the number that was given to me. If you’re the city, you have to do whatever you have to do to take care of your creditors. And I’m a creditor.”

Kevyn Orr, the financial manager, is faced with getting Detroit out of an $18 billion hole, which includes a projected shortfall of $104 million in pension payments for just this year. Orr’s analysis of the pension funds claims the nest egg is only 65 percent of what it needs to be for Detroit’s general employees fund, and 78 percent of what’s needed for the police and firefighters fund. The city already is $50 million behind in payments to the pension funds, and Orr has said he’ll miss a $54 million payment due June 30.

Orr has indicated he wants to freeze pensions for 10,000 city workers in the plan but still on the job, and will consider moving retiree health care plans to Medicare or, for those who don’t qualify, under the Affordable Care Act. Nicknamed “Obamacare,” the act is in the process of rolling out over the next year, though the details still remain sketchy.

But many of the city’s pensioners wouldn’t be able to afford any kind of increase in their health care costs. And many fear that health care is just the first step. Last week, Orr presented city bondholders with an offer that could pay them less than 10 cents on the dollar, without making any mention of sacrificing the city’s pension payouts. If the bond investors refuse to make a deal, the city could be forced into a municipal bankruptcy where, Orr believes, the pensions could be subject to cuts by a judge.

While the state constitution prohibits cuts to municipal pensions, Orr has said he thinks federal bankruptcy rules will trump the state law.

Some widows in the police and fire pension get as little as $1,000 a month, said retired Detroit Police and Fire Fighters Association president Don Taylor, and receive no Social Security. Some already choose between medical premiums, rent and prescriptions, he added. “We thought it was guaranteed because the state Constitution says our pensions can’t be diminished,” Taylor said. “Now I guess it’s just a part-time Constitution we work under, because it doesn’t always limit cuts.”

Retired police officers and firefighters face the biggest risk because they didn’t pay into the national Social Security system as part of their pension deals, and can’t collect benefits in most situations. Even if the cuts to retirees is limited to moving them from a city health plan to Medicare, their lack of standing in the Social Security system could mean they have to pay extra Medicare premiums.

“Some of our members would have to pay premiums for Parts A and B,” Taylor explained. “Part B is about $140 a month now, but if you have to pay for both, it’s around $500 and $600 a month.”

Not that some city retirees wouldn’t be pinched quite a bit less than others. At least 59 retirees receive more than $90,000 a year in pensions, and 23 get more than $100,000, according to city records. In addition, early retirees could go back to work, while the 4,700 retirees who left during the 1980s and earlier — as far back as the 1940s, in two cases — wouldn’t be able to supplement a diminished pension with a job.

“Younger people would have more options to save now or try to accumulate savings or cut back on their spending to supplement what they’re going to lose,” said Lyle Wolberg, a partner and senior adviser at Telemus Capital, a financial planning firm in Southfield.

Households with other assets, including pensions and retirement accounts earned by a spouse, would also be better positioned to absorb a pension cut or health care hike, he added. “The people who can least afford a 10 percent cut, for example, are those with lower pension incomes,” he said.

Wolberg also noted that — if it happened — cutting the monthly benefits of city pensioners would be vastly different from how Metro Detroit’s other big employers reduced their own pension liabilities. Both Ford Motor Co. and General Motors Co. have been offering retirees cash buyouts of their pensions, often cutting impressive checks to some former executives, he added. “I have a 90-year-old client who was offered $500,000 in a Ford pension buy-out,” Wolberg said.

For today, at least, the talks between unions, pension funds and the emergency manager are limited to healthcare. And like the negotiations with bondholders, the results are sure to raise more questions — along with the ire of anyone asked to settle for less than the city once promised.

It’s a job that Schultheis, the 84-year-old retired lighting lineman, said he doesn’t envy.

“I feel sorry for Kevyn Orr, I really do,” Schultheis said. “I may not like what he’s doing to me, but that is one hell of a job to have on your hands and all of the people think you’re a rat ... and have no use for you. But the guy’s trying to do something.”

Staff Writers Darren Nichols, Michael Wilkinson and Robert Snell contributed.
boconnor@detroitnews.com
313-222-2145

From The Detroit News: http://www.detroitnews.com/article/20130620/METRO01/306200051#ixzz2Wog7ZDL2

Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)