Detroit retirees trim the future pension after judge's bankruptcy ruling

Detroit City defends the potential large scale reduction including the US bankruptcy law Chapter 9, the retiree's pension and the sudden loss of unsecured creditors, which will govern the local government, and will restructure the city to Detroit It seems like it is probably the order of the day.

U.S. bankruptcy judge Steven Rose read loudly for over an hour from the prepared text and met December 3, specific legal criteria necessary for receiving protection from creditors, so Detroit Was officially judged to be bankrupt qualified. As a result, Detroit now has the title of "the biggest bankruptcy city in the history of the United States".

Detroit has $ 18.5 billion in debt and retirement benefits and retiree healthcare account for half of the debt resulting in $ 5.7 billion in obligations arising from retiree healthcare and $ 3.5 billion in unfunded pension obligations Has been added.

Rose argued that the city was not "negotiating in good faith" with the creditors, but since many of the more than 100,000 creditors failed to negotiate at the beginning or wanted to negotiate, negotiations were " Impossible to perform ".

Roast also noted that in contrast to the earlier assertion that 23,500 retired people in Detroit permit the Michigan State Constitution to provide special safeguards to protect retiree medical benefits and pensions, Can be reduced. The Michigan Constitution protects public pension benefits as a contract, but these contracts may be harmed by the bankruptcy of local governments.

But Rose stated that the reconstruction plan had to consider all creditors, including retirees, and should be emphasized compared to the most sensible ones for the city, the court said that coordination damaging pension rights I warned not to confirm the plan.

A US state, county, municipal officials meeting 25 (AFSCME) submitted a complaint alleging that a judge complained that a judge ruled that the federal bankruptcy law would take precedence over civil servant pension protection stuck to the Michigan state constitution. Michigan State Attorney General Bill Schuget said the judge's decision was disappointing and the Federal Court of Appeal announced that the Federal Court of Appeals reaffirmed its support for pension protection. It is expected that other labor unions and Detroit's pension are equally attractive.

Rodeo refused to continue bankruptcy proceedings, stating that the appeal began to proceed through the court and that all motions to appeal his judgment must first be submitted to the bankruptcy court. He stayed in the case before in all state court cases.

Because Detroit became the subject of bankruptcy, Mr. Kevin Oh, Detroit 's emergency manager, has confirmed the "reconciliation plan" planned to be filed in early January. Prior to the bankruptcy ruling, Orr 's original suggestion of replacing unsecured loans with $ 11 billion and providing $ 2 billion in bonds may change.

Financially municipalities with unpaid pension obligations will carefully monitor Detroit's future trends. Unlike employees working in the private sector, public pensions are not protected by federal pension benefit guarantee companies.

Although some analysts predict the difficult process of preventing most municipalities from mimicking Detroit merely by bankruptcy eligibility, this decision is based on a model that other cities will follow in the future .

According to an article on bankruptcy announced by Reuters on December 3 last year, Merritt Richard Chicalon, president of Ricardo Chicalon said that this decision "there is a possibility that bankruptcy will increase as it is a way to get out of pension contracts" Stated. A creditor holding a conventional debt must consider its options. "

Associate Professor Robert Nobay Marx of the University of Rochester Simon Business School calls the judge's decision "very important" in the Detroit Free Press article on 3 December 2013. "In terms of the legal economic situation, we clarify the fact that pension benefits can suffer damage."

"This is a major change in the conversation that workers and local governments are advancing," said Nouba Marx, who has expertise in public pensions. "Until now, workers have said that they intend to pay wages regardless of what we are planning to negotiate."

Rhodes' judgment also means that Detroit Institute of Art (DIA) has not been exempted from restructuring. According to Kevin Ohr, an emergency manager in Detroit, a municipal collection, including paintings by Vincent van Gogh and Henri Matisse, is valued by auction house Christies. Christie's auction house makes a preliminary estimate that the artwork purchased by the city for the museum collection is worth up to $ 866 million.

Detroit, the only city in the United States, does not face amazing pension obligations. Chicago is faced with a $ 20 billion pension shortage, but in Illinois state it ambiguously distinguishes that the national public employee pension scheme is the worst public employee pension scheme. The State of Illinois passed the long-awaited public pension reform on 4 December 2013. It has been challenged by the union in response to the signature of the president.

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