(Reuters) - Detroit’s Police and Fire Retirement System board on Thursday voted to recommend that its 13,000 current and retired members vote in favor of the city’s plan to adjust its debts and exit bankruptcy.
Last week, the city’s other pension fund, the General Retirement System, took similar action, urging its 20,200 members to vote “yes” on the plan.
The police and fire pension board, in an 8-3 vote, passed a resolution supporting the plan, which cuts annual cost-of-living adjustments for public safety retirees by 55 percent but does not reduce their direct pension payments.
The decision followed “careful review and consideration of reports and recommendations from its restructuring team of attorneys and financial advisors” that the plan was in the best interest of pensioners, the board said in a statement. It said a letter will be mailed early next week to its members recommending a vote in favor of Detroit’s plan.
Ballots, which were sent out in May, are due back by July 11. The city is hoping that a key component of the plan dubbed the grand bargain will sway voters.
The grand bargain taps $466 million pledged by philanthropic foundations and the Detroit Institute of Arts and $195 million in state funds to ease cuts to city retiree pensions and protect art works from being sold to pay city creditors.
City of Detroit and state of Michigan officials have warned that if members of the two retirement systems vote to reject the plan, funding from the grand bargain would be yanked and pension benefits would be subject to bigger cuts.
Two companies that guarantee payments on some of Detroit’s outstanding water and sewer revenue bonds -- National Public Finance Guarantee Corp and Assured Guaranty Municipal Corp -- are urging bondholders to vote against the plan.
Judge Steven Rhodes, who is overseeing Detroit’s bankruptcy case, has set an Aug. 14 start date for a hearing to determine if the city’s plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history is fair and feasible.
Reporting by Karen Pierog; Editing by G Crosse and Leslie Adler