April 16 Detroit's two pension systems reached
tentative settlements with the bankrupt city over major
financial issues late on Tuesday, a significant step in
Emergency Manager Kevyn Orr's effort to roll up agreements with
major creditor groups.
Mediation continued on Wednesday over various governance
matters and Bruce Babiarz, spokesman for the Detroit Police and
Fire Retirement System, said details were not available as the
situation was still fluid.
The fund for public safety workers and Detroit's General
Retirement System said in a joint statement that the settlements
still have to be reviewed by their boards and that negotiations
with the city will continue for several days.
"The proposed settlements will ultimately be decided on by
current employees and retirees who are eligible to cast a ballot
in the bankruptcy process to accept or reject the settlement
offer," the statement said.
The two pension funds represent some 23,000 active and
Detroit's Chapter 9 municipal bankruptcy case, the biggest
in U.S. history, has been on the fast track since last week when
the city won bankruptcy court approval for a crucial deal over
interest rate swaps and reached a settlement with bond insurance
companies over the treatment of voter-approved general
On Tuesday, federal court mediators announced that Detroit
had reached its first settlement with a group representing
retired city workers.
Under the deal with the Retired Detroit Police and Fire
Fighters Association, pensions for retired police and fire
department workers would not be decreased but cost-of-living
(COLA) increases would be cut in half. A separate voluntary
employee beneficiary association plan, or VEBA, will be
established for retiree healthcare, according to a court
Citing multiple sources, the Detroit News reported that
pensions for general city workers would be reduced by 4.5
percent and would not receive an annual COLA under the tentative
deal with the general retirement system.
In its latest plan to adjust $18 billion of debt and exit
bankruptcy, Detroit had cited much bigger pension reductions of
as much as 14 percent for police and fire and 34 percent for
general employees. The city is expected to release a revised
bankruptcy blueprint ahead of a Thursday court hearing on
unresolved creditor objections.
Detroit's plan still faces a vote by its scores of creditors
and a determination by Judge Steven Rhodes if it is fair and
equitable and does not discriminate unfairly among unsecured
creditors, which include other bond insurers and bondholders
that could face much steeper cuts of as much as 85 percent.
(Reporting By Karen Pierog, additional reporting by Lisa
Lambert in Washington; Editing by Tom Brown)