By COREY WILLIAMS, Associated Press
DETROIT (AP) — A proposed plan to restructure Detroit's debt calls for retirees and pensioners to receive $4.3 billion in payments and bondholders about $1.1 billion over the next 40 years, leaving the bankrupt city with a surplus of nearly $336 million.
The figures were obtained Friday by The Associated Press, along with state-appointed emergency manager Kevyn Orr's 99-page plan of adjustment to Detroit creditors.
The plan, given earlier this week to city unions, retirees, two pension systems, banks, bondholders and other creditors, has been touted as the blueprint for Detroit's future and key in the city's sojourn through the largest municipal bankruptcy in U.S. history.
Orr wants Detroit's creditors to give their blessing. But it isn't clear on how creditors shake out in terms of the percentage of what they're actually owed. And bankruptcy experts interviewed by the AP on Friday said even they could not decipher who stands to get the best deal.
"It's complicated," bankruptcy attorney Michael Sweet, with Fox-Rothschild's San Francisco office, said of Orr's plan. "There are clearly a lot of moving parts and there's a lot of thought that has gone into this."
The plan includes the possible spinoff of the city's Water and Sewerage Department to a regional authority. The city would receive $47 million annually under a lease deal.
Also included in the plan is millions of dollars promised by foundations, the state and the Detroit Institute of Arts to prevent any possible sale of city-owned pieces in the museum to bolster at-risk pensions.
The city also would establish a voluntary employees' beneficiary association that would provide health care benefits to retirees.
Orr's office would not comment Friday on the plan, but earlier said the emergency manager wants the creditors to sign off on it before submitting it to U.S. Bankruptcy Judge Steven Rhodes in about two weeks. Rhodes has set a March 1 deadline for the plan of adjustment.
Orr has said the city's debt is at least $18 billion. About $6 billion is Detroit Water and Sewerage Department debt, which is secured by water bill payments. An additional $12 billion is unsecured, meaning it's not covered by a revenue stream. That includes about $2 billion in general obligation bond debt, $5.7 billion in unfunded retire health care obligations and $3.5 billion in unfunded pension liabilities.
Pension officials have disputed that figure.
"We appreciate the work that has been done in the public and private sectors to potentially mitigate cuts to pensioners in the city's bankruptcy," said Bruce Babiarz, spokesman for the Detroit Police and Fire Retirement System. "However ... debilitating pension cuts are still part of the city's plan.
"This is a highly complex matter, with many still unanswered questions and subject to court-ordered mediation. We believe that all alternatives need to continue to be explored which will minimize any cuts to pensions."
In the end, some of the city's pension debt will not get paid, according to James McTevia, a turnaround expert and managing member of McTevia & Associates in suburban Detroit.
"There is no way in the world these unfunded pension obligations are ever going to be paid 100 percent on the dollar," McTevia said. "If they ever are going to be repaid, they are going to take years to repay them.
"This is a long-term payout to these creditors that is the very best the city says it is capable to offer and put together."
Much of the plan also is tied to ongoing negotiations.
On Thursday, an agreement was reached in a dispute over health insurance for retirees. That likely ends a lawsuit by retirees. No details have been released.
The city last year had proposed shifting some retirees to Medicare and giving a monthly stipend to retirees under age 65 to buy their own insurance.
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