Pension Deal Edges Detroit a Step Closer to Recovery

New York Times
April 16, 2014

Detroit’s pension boards and a retirees’ group say they have reached tentative agreements with the city that could serve as a breakthrough in its quest to settle with its major creditors and propel itself out of bankruptcy before the end of the year.

Since the city filed for bankruptcy last year citing $18 billion in debt, the fate of Detroit’s pension funds and retirees had been a central point of debate, particularly after the city announced it would have to cut pensions the way it was slashing repayments to banks. Retirees and leaders of the pension funds had argued that their pension payments were protected by the state’s Constitution.

“These ‘tentative settlements’ tonight are the result of months of hard work and good-faith negotiations,” a statement issued jointly by the two pension fund boards said in part. It added that many details remained to be resolved in further negotiation.

If completed, the agreements with the pension funds and with a group representing 6,500 retired police officers and firefighters seemed certain to provide Detroit’s blueprint for paying off portions of its debt, known as a plan of adjustment, with a simpler journey through court. They may also offer a political boost to the city’s plan in the eyes of the public. In Detroit, retired municipal workers make about $19,000 a year on average from pension payments, pension fund officials say, and retired police officers and firefighters, who do not get Social Security benefits, receive about $32,000 a year.

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