Detroit reaches deal with retired police officers and fire fighters
The City of Detroit, which filed for Chapter 9 bankruptcy protection in July of 2013, has reached a deal with its retired police officers and fire fighters that preserves their current pensions but makes significant cuts elsewhere. The Retired Detroit Police and Fire Fighters Association, which represents more than 80% of Detroit’s retired public safety workers, engaged in intense negotiations with Emergency Manager Kevyn Orr and other municipal officials charged with representing the City’s interests. Mr. Orr had originally proposed huge cuts to pensions and other benefits of City workers.
Under the agreement, pensions will not be cut, but cost-of-living increases will be cut by half, with provisions for increases based on positive returns on investment.
Although the agreement is not as drastic as had been feared, remaining City workers and retirees will likely face even worse cuts, judging by the original proposals made by Mr. Orr and the City. Furthermore, the question of whether vested retiree benefits can be altered in bankruptcy, and how much, has not been settled by our legal system. In a difficult balancing act, City employees who have been steadfastly asserting their right to benefits were faced with an onslaught of urgings to reach a compromise that proponents claim will assist the City in emerging from bankruptcy.
The deal must still be approved by the bankruptcy court as well as the Association members, and is contingent on funding from a $816 million rescue package funded by foundations, philanthropists and the state. This is the first major agreement the city has reached with its retirees in what is the largest public bankruptcy in U.S. history.
For more information, contact your labor law counsel.By Jolene Kramer | April 29, 2014