Detroit Hit by Restructuring Plan That Attacks Jobs, Healthcare and Pensions

Abayomi Azikiwe, editor of the Pan-African News Wire, speaking in East English Village in Detroit on December 6, 2008. (Photo: Alan Pollock)., a photo by Pan-African News Wire File Photos on Flickr.

Detroit Hit by Restructuring Plan That Attacks Jobs, Healthcare and Pensions

Orr announces $2.5 moratorium on unsecured debt at private airport meeting with creditors

By Abayomi Azikiwe
Editor, Pan-African News Wire

A new restructuring plan has been issued with no real input by the people of Detroit. Kevyn Orr, the state-appointed emergency manager held a closed meeting on June 14 with creditors and some labor leaders at the Westin Hotel right next door to the main airport terminal for Wayne County.

Orr’s meeting was met with a demonstration organized by the Moratorium NOW! Coalition which brought a group of workers, retirees, community activists and youth to the airport to denounce the emergency management system for its total disregard of the democratic will of the people of Detroit and Michigan as well as the preferences given by the EM to the bankers and bondholders who are largely responsible for the destruction of the city’s infrastructure and the impoverishment of its people.

Friday’s demonstration, which gained national press coverage, culminated a series of activities over the previous six weeks which attempted to mobilize people in the city to challenge the role of the banks in the proposed restructuring of Detroit. Detroit has consistently opposed the appointment of an emergency manager through mass demonstrations, rallies, civil disobedience, lawsuits, petition drives and a statewide referendum.

On June 10, Orr held a “public meeting” at Wayne State University’s Law School where he presented a dire review of the city’s finances. Despite the cancelling of two meetings the previous week, hundreds turned up to hear what the emergency manager had to say.

Most people at the gathering were those opposed to the appointment of Orr. Many sought entry into the meeting but well over 200 people were declined admission due to limited space. The Moratorium NOW! Coalition to Stop Foreclosures, Evictions and Utility Shut-offs called for demonstrations at both the cancelled appearance at Greater Grace Temple on the northwest side on June 6 and at the WSU Law School on June 10.

Other groups joined Moratorium NOW! Coalition both inside and outside the Law School holding signs and chanting slogans related to the need for making the banks pay for the crisis and bemoaning the theft of the right to vote for officials who have some semblance of political authority. Emergency management has been implemented in many cities across the state, most of whom have majority African American populations.

Signs calling for a moratorium on the payment of debt-service to the banks and the preservation of the pensions for municipal employees were well in evidence and were photographed by the local and national press. As dozens of people lined-up outside the door of the Law School after finding out that they would not be allowed in, many broke out chanting “Let us in! Let us in!”

The demonstration lasted for over two hours while the meeting took place inside the building. Atty. Jerome Goldberg, who attended the meeting, asked Orr why he was not going after the banks which have “stole billions from the people of Detroit.”

Orr said he did not want to look back on who was responsible for the crisis. He said that Moratorium NOW! Coalition should pursue a class action lawsuit against those responsible for the foreclosure crisis in Detroit.

Goldberg said that in 1934, a Supreme Court decision, Home Building and Loan Association v. Blaisdale, determined that the right of people to live in their homes during an economic crisis superseded the contract clause of the United States Constitution. Goldberg’s questions and statements were met with attacks by the conservative daily Detroit News in two columns which attempted to claim that the banks were not responsible for the destruction of the city.

Orr’s Report and Its Impact on the Workers and Residents of Detroit

What Orr advanced in the “City of Detroit: Proposal for Creditors,” was essentially the same doomsday scenario for the financial crisis in the largest per capita African American city in the U.S. The municipality is facing approximately $US18 billion in long term debt and the population is still declining now standing at less than 700,000.

What jumped out immediately from the report was the claim that the “The City will not make the schedule $39.7 payment due on its pension-related Certificates of Participation on June 14, 2013.” The Certificates of Participation (COPs) are financial instruments that derive revenue from lease transactions that are considered unsecured.

This has been the first substantial default on payments to creditors since events in Cleveland in 1978. It was also reported that $US2.5 billion in other unsecured debts, those not based on revenue-generating assets, will not be paid in the short-term.

For the last several weeks the financial community has expressed concern over calls for a moratorium on both debt service and principal payments to banks and bondholders. Moody’s in a press release in May objected to these proposals being floated by Orr and his advisers.

During the week of June 10, Detroit was hit by what Standard & Poor (S&P) described as a super-downgrade on the value of its bonds. Later Moody’s also issued a downgrade which will compound the financial crisis in the city by further destabilizing its so-called “credit-worthiness.”

What is glaringly absent from Orr’s report is the need for hundreds of thousands of jobs for people who live in the city in order to create an economic recovery. Massive joblessness still exists in the city which was acknowledged in the report, but no concrete plan for the creation of employment was advanced.

There is much discussion about the rise in crime in the city, but no recognition of the role of the financial institutions in targeting the city’s population for predatory lending both in housing and in municipal finance is mentioned. Also the problems associated with public lighting are also cited but no program for repairing the city-owned equipment was discussed.

Another closed-door meeting is scheduled to be held with labor unions on June 20. Union leaders who were present at the airport expressed their opposition to the proposed changes in healthcare and pension benefits.

Although specific details have not yet been released, proposals were announced that would cut pension allotments, the cancellation of healthcare benefits for retirees forcing them into the Affordable Healthcare Program or Medicare. The Department of Water and Sewage, the Department of Public Works, Belle Isle and other public assets are being strongly considered for privatization of operations initially and possible sell down the line.

What Is Needed in the Coming Period

The labor unions, municipal retirees, community organizations, youth and workers in general must organized to fight these proposed austerity measures. Orr, who is a bankruptcy attorney by profession, is positioning the State of Michigan to enact even deeper cuts to workers and residents of Detroit.

Over the last five years workers have already experienced pay cuts, furlough days, rises in benefits payments, lay-offs and privatization of services that have destroyed jobs. Over 2,700 municipal positions have been eliminated since 2010 and the conditions of employment have worsened considerably.

If there is any push back from workers, pension boards, retirees and other community organizations, Orr has threatened to take the city into bankruptcy, which will be the largest in U.S. history involving a major municipality. Federal bankruptcy law will enter unchartered territory which could lead to court-imposed cuts in pensions, which are guaranteed by state law, but may be subjected to drastic changes through a bankruptcy procedure.

Other municipalities facing similar problems in Stockton and San Bernardino, California have been subjected to efforts by the banks and bond insurers to force the cities to pay its financial creditors as opposed to making pensions and healthcare a priority. In Jefferson County, Alabama, JPMorgan Chase was forced to write-off over 70 percent of its claims on the area where Birmingham is located.

Moratorium NOW! Coalition and other mass organizations are committed to working with the labor unions and retirees to fight the imposition of the bank-engineered austerity program of Orr. The capitalist crisis, which is impacting cities across the U.S., cannot be resolved without people’s control of public assets and the implementation of state planning to guarantee that the essential needs of the majority of people in the municipalities be met.