Police Commander, Sergeant Unions Settle With Detroit; Bankruptcy Judge Looks On

DETROIT, MI &#8211 U.S. Bankruptcy Judge Steven Rhodes on Monday paved the way for a historic vote to begin next week on Detroit’s plan to shed billions in debt, while two public safety unions inked contract deals and the city’s largest police union held out for a better offer.

The five-year deals were disclosed in an updated debt-cutting plan filed Monday in bankruptcy court that covers pensions, wages and health care for members of the Detroit Police Lieutenants and Sergeants Association and the Detroit Police Command Officers Association.

Rhodes approved language in the city’s proposed blueprint for restructuring $18 billion in debt. The blueprint will be mailed to 67,000 retirees, beneficiaries and creditors Monday — all of whom get to vote on the proposal. Another 103,000 creditors or interested parties not eligible to vote also will receive details of the city’s reorganization plan.

Sgt. Mark Young, president of the police lieutenants and sergeants association, said the 500-member union secured a four-year, 12.5 percent “wage restoration” to restore a 10 percent cut imposed in 2012. It also got the city to agree to a 50 retirement age for officers with a minimum 25 years of service, verses the age 55 requirement the city originally proposed.

The union’s board voted 28-3 to cut a deal with Emergency Manager Kevyn Orr instead of risk the uncertainty of getting a contract forced upon members by the bankruptcy judge in a process known as a cramdown, Young said.

“The terms of a cramdown were very harsh,” Young told The Detroit News.

The deal could avert threats of a mass layoff of police supervisors and detectives, Young said.

“A lot of guys who were going to retire, they may stay now,” Young said. “That was a major concern. A cramdown probably would have forced a lot of them to go.”

The command officers union and its approximately 30 members reached a similar deal, which also provides for a 1 percent cost-of-living adjustment. Members overwhelmingly voted for the deal Wednesday, union President Aric Tosqui said.

“Comparing the city’s last offer and the cramdown, I don’t think we were left with any other choice,” Tosqui said.

In recent weeks, Detroit has assembled a string of deals with unions, banks, pension funds and bondholders, all of which have agreed to pension and other cuts and to support the city’s plan to restructure $18 billion in debt.

However, the city has not reached deals with two other public safety unions: the Detroit Police Officers Association and the Detroit Fire Fighters Association.

Those unions have been offered 12.5 percent wage increases over four years to restore their pay to 2011 levels and provide for a slight cost-of-living increase, city spokesman Bill Nowling said.

Barring any new deals, the plan outlines how pensions will be calculated for members of those unions.

Members can retire at age 52 after 25 years of service. Their pensions will be based on the average compensation for the last 10 years, instead of five years — a move that will result in smaller pensions.

The pension amount will not factor in overtime, unused sick time or bonuses.

Meanwhile, the health care proposal for members of the Detroit Police Officers Association, along with $14-an-hour starting pay for new recruits, has become a sticking point in stalled bankruptcy negotiations.

The proposal offers insight into contentious negotiations between the city and a key public safety union that could either speed the city’s exit from bankruptcy court or mire Detroit in a prolonged legal battle.

The 1,847-member union won’t agree to the offers, according to Mark Diaz, president of the Detroit Police Officers Association. He thinks the proposal is a bid by Detroit to prevent veteran officers from retiring.

“I would assume that’s their intent to keep people here,” Diaz told The News on Monday. “To suggest we’re going to cut the lowest paid police officers (in the state) anymore and decimate their benefits anymore, it doesn’t add up. Not when we’re trying to build a foundation for the future of Detroit.”

Nowling said the city can’t afford health insurance for police officers who retire at a young age and typically go to work for other law enforcement agencies.

“We can’t afford that type of Cadillac plan anymore,” Nowling said. “I don’t think anybody expects the city to pay benefits to 38-year-old retirees right off the block.”

Among the new details in the plan, the city revealed that if it spins off the Detroit Water and Sewerage Department within seven years, half of the money “may be used to help” restore pension cuts.

For the first time, Monday’s amended plan said the state could make a $194.8 million lump sum payment to bolster retiree pensions and shield the Detroit Institute of Arts collection from creditors. The money represents the present value of Gov. Rick Snyder’s $350 million commitment over 20 years.

The amended plan also calls for the city to pay 10 cents on the dollar for a $4.3 billion claim on retiree health care, distributing $450 million to two voluntary employee benefit associations that will manage retiree health insurance.

As debate over infusing Detroit’s pension funds with state aid ramps up in the Legislature, the amended plan contains new details about strings attached to taxpayer money.

Under the plan, two investment committees would be formed for each pension fund that would have a major influence over investment management decisions.

The general retirement and police and fire investment committees would each consist of five independent members with an expertise in either economics, finance or institutional investing. Their initial appointments would be done through a “mutual agreement” among the pension boards and state and city officials “in consultation with” 12 private foundations contributing $366 million toward the $816 million fund to bolster pensions.

Both pension fund boards would be able to appoint a retired member and active employee member to their respective investment committees, but the decision-making power would rest with the independent members.

Bruce Babiarz, spokesman for the Police and Fire Retirement System, said the pension board has reached final agreement with the city over the role of the investment committees.

“The board is looking forward to the formation of an investment committee for added oversight going forward,” Babiarz said. “But that final language has not been worked out.”

From The Detroit News