|Mark Guarino Staff writer|
Just when it looked as if
The duo – Financial Guaranty Insurance Co. (FGIC) and
“We understand why the retirees and unions voted in favor of the city’s plan – if we were offered a similar deal we too would approve the plan,”
The two insurers say
“I don’t think [the creditors are] going to get to an agreement before trial because they’ll be litigating all these issues. Everyone knows that, so there’s no mystery what they’re going to say or do,” Professor Pottow says.
If there's no settlement that eliminates the need a trial,
Orr says he is encouraged that the pension groups are on board with his plan. “The voting shows strong support for the city’s plan to adjust its debts and for the investment necessary to provide essential services and put
Pottow agrees that the yes vote from the pension groups is “a big relief for the city.” About 82 percent of retired and active police and firefighters approved Orr's plan, as did about 73 percent of general public workers. Police and firefighters will see no cut to their pensions except for a partial reduction in their annual cost-of-living increase; general retirees will see their monthly pension benefits cut 4.5 percent and an end to their cost-of-living increases. Had they not accepted the offer, their pension benefits could have been cut by at least 27 percent, Orr said.
Cuts to city retirees were not as deep as expected because of a “grand bargain” forged in May between labor unions and the city. If Rhodes approves the grand bargain next month,
Moreover, labor unions agreed to the plan that would spin off the city’s art collection at the
While pension groups digged in their heels, they were the most likely to accept Orr’s terms because they are more dependent on Detroit’s future comeback, says Pottow.
“It was a pretty well-ventilated issue and both sides were both pretty aggressive,” he says. “But [pensioners] live around here and, while they want the best for themselves, they also want the streetlights on and recognize the city has to move forward. Bondholders are not as bound by that.”
It is “too early to say” if the concessions
“Even states with strong constitutional protections for workers can still yield concessions in Chapter 9 [bankruptcy protection],” he says. “That will give some municipalities in states with similar laws some encouragement.”