Detroit EM: Retirees would get 70-90% of their pensions under plan submitted in bankruptcy court
Detroit Bankruptcy
- Candidate for governor Mark Schauer pans Detroit debt adustment plan's pension cuts
- Detroit EM: Retirees would get 70-90% of their pensions under plan submitted in bankruptcy court
- Gov. Rick Snyder says 'comeback is underway' as Detroit submits plan in bankruptcy court
- Oakland County: No comment on Detroit's plan of adjustment
- Detroit bankruptcy: 120-page debt plan and 10-year reinvestment outline filed
Protestors
opposing cuts to Detroit retiree pensions protest outside a federal
bankruptcy hearing in Dec. 3, 2013 file photo. The city on Friday, Feb.
21, 2014 submitted a plan of adjustment to the court proposing cuts that
Detroit Emergency Manager Kevyn Orr said would give police and fire
retirees -- who don't get social security benefits -- 90 percent of
their pensions. The proposed plan would give general retirees 70 percent
of their pensions, Orr said. The plight of Detroit retirees has been at the center of public concern over the case since the city entered bankruptcy in July 2013. And private foundations stepped up to pledge more than $400 million in an effort to help cushion the blow of whatever cuts pensioners take and to protect the Detroit Institute of Arts collection from sale.
But pensions still needed to be reduced, according to the city's state-appointed emergency manager Kevyn Orr.
If his proposed plan of adjustment is approved by U.S. Bankruptcy Judge Steven Rhodes, and if a $350 million state contribution to pension aid funding passes the legislature, Detroit's police and fire department retirees would get more than 90 percent of their pensions, Orr said in a statement Friday.
Detroit police and fire retirees don't get Social Security benefits.
General retirees, would get 70 percent of their pensions under the plan, assuming the help from foundations and the state comes through, Orr said.
The plan would also depend on major changes to the city's two pension systems, which would "operate under more conservative investment return assumptions," resulting in "contribution predictability and stability," Orr said.
Some of the state aid would be reserved for retirees in danger falling below the federal poverty level.
"The state’s focus is on protecting and minimizing the impact on retirees," said Gov. Rick Snyder in a statement, "especially those on fixed, limited incomes, restoring and improving essential services for all 700,000 Detroit residents and building a foundation for the city’s long-term financial stability and economic growth."
Ryan Plecha, an attorney representing retirees in the bankruptcy case, said the plan was being reviewed and that he would comment later in the day.
Orr was scheduled to speak to reporters in a conference call at 2 p.m.
Detroit Emergency Manger Kevyn Orr filed the plan detailing how and where to slash an estimated $18 billion in the city's long-term obligations, along with a 10-year outline of reinvestment in city services.
View the full plan of adjustment here, and an outline on how the city plans to reinvest in city services as a result of the debt relief here.
U.S. Bankruptcy Judge Steven Rhodes will have final say over whether the plan goes forward.
It's the product of months of negotiations over how and where to slash an estimated $18 billion in long-term obligations.
Rhodes from the very first hearing in the case demanded an all-out effort to achieve consensual agreement between the city and its creditors in forming a plan of adjustment, appointing a team of mediators to help avoid a forced, unilateral, debt-slashing “cramdown.”
And Orr, with an expensive team of lawyers, spent seven months meeting behind closed doors with unions, retiree groups, bond insurers and other creditors to craft one.
The bulk of the city’s debt, according to Orr’s estimates, lies in obligations tied to the water department – about $6 billion, retiree pensions and health care – about $9.2 billion, and general obligation bonds – about $2 billion.
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Detroit EM: Retirees would get 70-90% of their pensions under plan submitted in ...
The cause of this was properties during the Great Recession going in Value from around $100,000 to $4,000 to 14,000 in actual value. This plummeted the tax base and because pensions of city workers could not longer be paid through the city into bankruptcy. Now, the city employees who are retired or who will retire can expect to receive only 70% to 90% of what they were promised if that. There really is no ultimate guarantee that they will receive 70 to 90% of their originally promised retirement incomes only a hope that the economy can support that into the future. And that mostly depends upon what value properties will have (because of all the different factors) in the future of Detroit.
Cities acrosst the U.S. from Stockton in California to Detroit in Michigan are still suffering the fallout from the Great Recession and likely will continue to. More bankruptcies might be on the horizon of cities unable to pay the retirement packages of retired or retiring city employees too. This problem hasn't ended yet and may continue during the next 20 years or more bouncing through cities hard hit in the devaluations of their homes.
So, if you are an investor in Municipal Bonds be sure not to buy bonds from any city or municipality unless they are insured by Treasuries or some other viable type of insurance so you don't lose the principal of your investments. Sometimes you might lose the interest but in the end recovering your principal might be the most important.
Tax free (state and Federal) if you live in the same state you are investing in often will significantly reduce your taxes every year. However, you have to make sure your investment principal is insured in some airtight way before you should invest in Muni Bonds even in your own state if you don't want to lose money. However, I think it is a very patriotic thing to do to invest in tax free municipal bonds and finance thereby the infrastructure of you own state through the development of colleges and schools, dams, water treatment facilities etc across the nation.
Many brokers recommend a 60% to 40% split in investing in 60% blue chip stocks that bear dividends and a 40% investment in tax free Municipal bonds to hedge against volatility in the stock market.
This is a strategy of long term investors because most short term investors(day traders) become bankrupt within 5 to 10 years on average. So, going long term often is the best and most secure investment for the long haul of any family especially if you are over 50 years old. Diversity of investments of paid for homes (location location location) and having a diverse portfolio allows one to potentially recover from whatever happens in the world. Whereas having all your eggs in one basket can often be the end of your investments and a return to being poor one day. So, wise diversity of investments allows a person to recover in any world situation the best.
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