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Pensioners likely to challenge Detroit plan to emerge from bankruptcy

| Friday, Feb. 21, 2014, 8:54 p.m.

DETROIT — Detroit presented its first full road map for leaving bankruptcy Friday, outlining an elaborate plan to restructure $18 billion in debt, demolish thousands of blighted homes and invest in the broken-down infrastructure that has made the city a symbol of urban decay.

If approved by a judge, the wide-ranging proposal would sharply reduce payments to some retirees and creditors. Pension holders could expect to get 70 percent to 90 percent of what they are owned, while many banks would receive as little as 20 percent.

The plan, which is sure to be the subject of court challenges, envisions a leaner, cleaner and safer Motor City after its crushing financial burdens are lifted.

“There is still much work in front of all of us to continue the recovery from a decades-long downward spiral,” Kevyn Orr, the city's state-appointed emergency manager, said in a statement.

Orr's so-called plan of adjustment “provides the best path forward for all parties to resolve their respective issues and for Detroit to become once again a city in which people want to invest, live and work.”

The state is focused “on protecting and minimizing the impact on retirees, especially those on fixed, limited incomes,” Gov. Rick Snyder said, as well as “restoring and improving essential services” and “building a foundation for the city's long-term financial stability and economic growth.”

The governor called the plan “a critical step forward.” But it leaves unanswered many questions, including whether creditors and labor unions will accept the deal or fight it, and how long that process might take.

The package calls for awarding police and fire retirees at least 90 percent of their pensions after eliminating cost-of-living allowances. Other retirees would receive at least 70 percent.

It still doesn't seem fair to Janice Pegg, 67, who receives the pension left by her husband, Victor, a Detroit police officer who died two years ago.

“He earned these benefits through his hard work, through his labor, through wage freezes back when he was employed,” Pegg said. “I thought that that would be money I would be able to take care of myself.”

Orr has said he would like the city to emerge from the nation's largest municipal bankruptcy by the fall, when his term is up.

Bankruptcy attorney and St. John's University law professor Anthony Sabino said the plan could spark an argument between city workers and retirees and police and firefighters.

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