Around the Nation
Tue June 10, 2014
Detroit's Big 3 Pledge Millions To Help City Workers' Pensions
Originally published on Tue June 10, 2014 7:23 am
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It's MORNING EDITION from NPR News. I'm Renee Montagne.
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And I'm David Greene. Good morning. Detroit has long been known as the Motor City. And yesterday, those deep ties to the automobile industry paid some dividends. As the city tries to dig itself out from the largest munificent bankruptcy in American history, the big three automakers have offered a multimillion dollar donation aimed at easing pension cuts for city retirees. The funds would also help preserve the collection at the Detroit Institute of Arts. But there are still some very difficult decisions ahead for the city. Quinn Klinefelter from member station WDET reports.
QUINN KLINEFELTER, BYLINE: Officials from Detroit, the state of Michigan and the U.S. auto industry gathered in a gorgeous room at the Detroit Institute of Arts, showcasing the works of famed painter Diego Rivera, in front of an enormous mural considered a national treasure. Ford Motor Company President of the Americas, Joe Hinrichs, says his company, Chrysler and General Motors, are donating a combined $26 million towards a deal to shore up Detroit's pension fund and save the city from raising the money by selling the valuable artwork surrounding them.
JOE HINRICHS: We hope our contribution will encourage other companies and organizations to come forward and join us in this effort to revitalize this great city.
KLINEFELTER: The museum still needs tens of millions of dollars more to complete its portion of what's known here as the grand bargain - the state joining with private foundations to provide Detroit with more than $800 million. Still, that's relative drop in the bucket for a city with long-term debts of 18 billion. But museum board chairman Eugene Gargaro says a deal that softens the blow to Detroit pensioners and allows the DIA's works to be transferred to a nonprofit trust is a win-win.
EUGENE GARGARO: This is about the DIA, certainly, but it's about Detroit. It's about Michigan, and it's about our pensioners. We're all beneficiaries of this wonderful effort.
KLINEFELTER: But some pensioners are not so sure. The grand bargain hinges on retirees accepting wage and benefit cuts spelled out in the city's plan to exit bankruptcy. Pensioners have until next month to vote on it. And some unions, like the Detroit Police Officers Association, are urging workers to vote no. While union President Mark Diaz acknowledges that his members face only reductions to their cost of living increases and health insurance, he says Detroit cops already make abysmally low salaries.
MARK DIAZ: Chapter nine is new - we're writing that playbook. And with respect to public safety, not just in the city of the Detroit but with every other city that's going to experience this, we have to make a very clear point that you have to embrace public safety.
KLINEFELTER: Retirees who are not public safety workers are staring at a four and a half percent cut in their monthly pension payments, not just cost of living trims like the police. And if they don't agree to that, Detroit emergency manager, Kevyn Orr, says a federal bankruptcy judge could, in the very descriptive legal term, cram down a much harsher cut.
KEVYN ORR: It's as simple as this - we're talking about retirees having to choose between medicine and cat food, in some cases. I mean, there could be cuts as deep as 40 percent. For someone making $20,000 - OK. It would be catastrophic.
KLINEFELTER: Yet, Orr knows he's in for a fight and not just from some of Detroit's unions. He says financial institutions that could lose hundreds of millions of dollars from bad loans are trying to rally other creditors to oppose this plan.
ORR: They're getting packages from some of the financial press in New York that are hearing from some of the bond insurers, trying to undermine the deal and sell the arts. So they're making a full-court press. But that's - you know, they're creditors, and that's what they're going to do - try to run the tables on that. And then, we've got to go to a confirmation hearing, which promises to be a battle royale.
KLINEFELTER: That battle, a hearing where a federal judge will weigh arguments from those opposing the proposed bankruptcy settlement, is set for mid-August. In the meantime, the city's art treasures and the amount of pensioners' monthly checks will continue to hang in the balance in the nation's largest ever municipal bankruptcy. For NPR News, I'm Quinn Klinefelter in Detroit. Transcript provided by NPR, Copyright NPR.