Pension Cuts, Blight Fixes Highlight Detroit Plan

Some retirees face cuts of up to 34%

By John Johnson,  Newser Staff

Posted Feb 21, 2014 5:44 PM CST

(Newser) – So how does a city $18 billion in debt go about ending the biggest municipal bankruptcy in US history? Detroit's emergency manager, Kevyn Orr, offered the broad strokes of the city's "adjustment plan" today:

  • Pension cuts: General city retirees face cuts of up to 34%, while police and firefighters face 10% cuts, reports the Detroit Free Press. Both figures could shrink before a final deal, though the local AFSCME chief already calls the plan a "gut punch" to retirees and says it is "unacceptable."

  • Blight: The city wants to spend $1.5 billion over 10 years to tear down abandoned homes and buildings, and invest in capital improvement projects, reports the Detroit News. Orr says the city needs to raze about 400 properties each week.
  • Creditors: Unsecured creditors would get only about 20% of their claims, while secured bondholders would get 100%.
  • Institute of Arts: The city's masterpieces would be shielded from the auction block, provided pensioners agree to Orr's plan, reports AP. It's all part of what the Detroit News calls a "grand bargain"—various foundations have pledged $365 million to the pension funds to keep the art in the city, while the museum plans to raise $100 million, and the state may provide $350 million more.
  • What's next: Lots of negotiations between the city and separate stakeholders. If even one of those groups signs off on the plan, it goes to bankruptcy judge Steven Rhodes, who then must determine whether to approve the whole thing, reports AP. Orr hopes the city is out of bankruptcy by the fall.
  • Orr quote: “We think our plan is reasonable. We think it is feasible. There are 700,000 residents who deserve an adequate level of services.”

The Detroit skyline from the city's midtown.
The Detroit skyline from the city's midtown.   (AP Photo/Carlos Osorio)
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