June 11 (Reuters) - The board of one of Detroit’s two pension funds agreed on Wednesday to urge its members to vote in favor of the city’s plan to adjust $18 billion of debt and exit the biggest municipal bankruptcy in U.S. history.
Detroit’s General Retirement System (GRS) said it will mail a letter early next week to current workers, retirees and other beneficiaries recommending a favorable vote and outlining the rationale for that recommendation.
“The board of trustees believes that the proposed (plan of adjustment) represents the best interests of GRS members, retirees and beneficiaries and further represents the best and most prudent option for maximizing the preservation of retirement benefits,” the board said in a statement.
In May, the city mailed ballots to about 20,200 members of the system soliciting a vote on the plan by a July 11 deadline set by a U.S. Bankruptcy Court judge. About 3,200 of those ballots contained erroneous information and had to be resent.
Under Detroit’s plan, general city worker pensions would be cut by 4.5 percent and annual cost-of-living adjustments (COLA) would be eliminated. The city was able to limit pension reductions through the so-called grand bargain, which taps into $466 million pledged by philanthropic foundations and the Detroit Institute of Arts (DIA) and $195 million in state of Michigan funds to aid retirees and protect art work from being sold to pay city creditors.
Thousands of members of Detroit’s Police and Fire Retirement System, who face lower COLAs but not pension cuts, are also voting on the plan. A spokesman for the system said the board will take up a similar resolution on Thursday.
City and state officials have warned that if members of the two systems vote to reject the plan, funding from the grand bargain would be yanked and pension benefits would be subject to bigger cuts.
Meanwhile, the DIA announced on Wednesday that the New York-based Andrew W. Mellon Foundation pledged $10 million and the Los Angeles-based J. Paul Getty Trust pledged $3 million toward the museum’s commitment to raise $100 million for the grand bargain. On Monday, the institute said Detroit’s three automakers pledged $26 million.
Reporting by Karen Pierog in Chicago; editing by Matthew Lewis