Politics & Government
1:07 pm
Tue April 15, 2014

Detroit bankruptcy mediators announce a deal with police and fire pensions

The Theodore Levin United States Courthouse in Detroit.
Credit Andrew Jameson / Wikimedia Commons

Mediators for the federal court overseeing Detroit's Chapter 9 bankruptcy say a deal has been reached between the city of Detroit and the Retired Detroit Police and Fire Fighters Association over pension and health benefits.

The deal calls for no cuts to current pension benefits, but does cut future "cost of living" increases in their benefits.

The Association's members still need to approve the plan through a vote.

The potential deal is the first agreement the city has reached with a group of retired workers.

Mediators say the agreement is contingent upon full funding of the so-called "grand bargain."

The grand bargain is a deal calling for more than $800 million in private and state money that would go toward offsetting pension liabilities. It would also spin off the Detroit Institute of Arts from the city, protecting the DIA's artwork from being liquidated in bankruptcy.

You can find more on the grand bargain here.

And here's more from today's press release:

The mediated agreement approved unanimously by the RDPFFA 's board today is contingent upon full funding of the so-called Grand Bargain, and under this agreement, the uniformed retirees would experience no cuts to their current pension benefits , and would receive almost half of their COLA benefits going forward. Further, depending upon the performance of the Police and Firefighters Retirement System ("PFRS "), there is also the possibility of full restoration of COLA benefits under the Plan of Adjustment. In addition, a separate PFRS Voluntary Employee Beneficiary Association plan ("VEBA'') for PFRS retiree healthcare will be established. Finally, the PFRS retirees will have a meaningful voice and retain a vote on the new pension board.

According to the press release, the RDPFFA has around 6,500 members and represents more than 80% of Detroit's eligible retired police officers and firefighters.

Michigan Radio's Sarah Cwiek spoke with Cynthia Canty today. Cwiek said this deal might give other retiree groups hope that their benefits won't be cut. But she points out that this is a bargaining process, and that Detroit's emergency manager Kevyn Orr started the negotiation with his proposed plan of adjustment. That plan called for big cuts to pensions.

"This would give the general retirees some hope that they're not going to have to take those big 26% cuts that Kevyn Orr was proposing, but at the same time they probably are going to have to take a least some cuts. And we'll see as these agreements pile up whether this makes them more inclined to make a settlement now and think that this is going to be the best deal that they're going to get," said Cwiek.

The fact that the RDPFFA deal is contingent upon state funding seems to put the ball in the state's court. But Cwiek points out that Gov. Snyder said he would like to see agreements with retirees in place before the state commits any funding to the deal, so it's unclear who will make the next move.

Kevyn Orr released this statement after today's announcement:

“This is another significant step forward as we work towards securing Detroit’s long-term financial viability.  I thank the Retired Detroit Police and Fire Fighters Association for its willingness to compromise, and I encourage all other parties to reach resolutions with the City in a timely fashion.  We are securing support for the Plan of Adjustment – the time to resolve our differences is now.”

*This post was last updated at 4:16 p.m.