Orr’s plan to fix Detroit: Sell the jewels and squeeze the pensioners

By Dave Palmer

Much talk is swirling through the news and the rumor mills as to what is going to happen to Detroit, its prized treasures, its workers, and its pensions as it is staring down the barrel of a potential Chapter 9 bankruptcy. Kevin Orr, Detroit’s emergency financial manager, seeks to stave off that possibility with some bold propositions to be sure. According to various articles in the Detroit Free Press, many priceless works of art could have a price on the auction block, some of the irreplaceable cars in the Detroit Historical Museum may be replaced with photographs under the auctioneer’s gavel, and the old idea to lease Belle Isle to the city surfaced as just a few ideas to pay off Detroit’s estimated $17 billion in debt.

As shocking as those ideas may be to many Detroiters, many more could be in for an even greater shock according to the June 9th edition of the Free Press. According to an article regarding the possibility of municipal bankruptcy for Detroit, the pension fund and associated health care costs make up about $7.5 billion of the $17 billion in unfunded debt. Surprise, surprise, retirees well out of the work force, people preparing to retire, and current workers may have to rethink their retirement situation as their pensions may be up for reduction or possible elimination. In fact, a news story aired on June 11th’s edition of 101 WRIF’s Dave and Chuck the Freak Show featured sound bites from an interview with Orr in which he referred to pensioners as “creditors” and indicated that they may have to take a hit along with all the rest of the creditors.

Pensioners are creditors? Does that mean that the city borrowed against the pension fund and now owes the workers that money? Shock.

Maybe it means that they took the workers’ contributions and tried to pay down other debt with that money. Again, shock.

No matter how the pension fund debt reached the $7.5 billion level, the fact still remains that the workers and the pensioners are not at fault. They signed a contract with the city in which they agreed to contribute part of their paycheck to the pension fund and the retirement health care plan. These plans were (hopefully) reviewed by actuaries to verify their long term sustainability, then signed, sealed and dated by city attorneys based on that assessment.

Instead of penalizing the workers for signing a contract backed by fingers-crossed-behind-the-back promises of city leaders and city attorneys, perhaps we should penalize the actuaries that signed off on the long-term sustainability of the contract. We could also penalize every past member of the Detroit City Council for making such pie crust promises. While we’re at it, we should hit the smiling mayors along the way who certified that the councils had every intention to fulfill these contracts, so long as they could take money out of the piggy bank and leave IOU’s in their place. Let’s not forget all the lawyers who approved these contracts. After all, it’s become quite apparent they didn’t do their due diligence when investigating the actuaries’ long-term sustainability claims.

Some other places to consider cutting is the size of the Detroit City Council, as well as their salaries. Let’s face it, Detroit’s population has declined to a point where a nine-member city council is no longer necessary. Five might be a better number. And why doesn’t the city consider requiring them to drive their own cars to work instead of paying for a city vehicle? How about eliminating the city-financed cell phones for the council? Surely the council’s reduced salary will be enough to cover their cell phone bill.

Maybe the city could try actually collecting taxes from its residents. After all, the Detroit News reported in February that 47 percent of the city’s taxable parcels are delinquent on their 2011 bills, adding up to some $246.5 million in taxes and fees. The Detroit Free Press reported in May of 2011 that 90% of  residents who live in the city and work outside the city pay no city taxes, adding up to the total budget deficit in that year, $155 million. Sure, they scream that paying taxes is useless because the city is delinquent in its services, but did they ever consider that the city may be delinquent in their services because they don’t pay taxes?

Detroit has definitely gotten itself into a pickle that won’t be easy to get out of thanks to systemic corruption, council members and mayors playing politics, and a kick-the-can-down-the-road mentality. But, this is not the fault of the city workers who were loyal to a fault, served their required time, and now are collecting low five-figure pensions. It is directly the fault of corrupt city officials, actuaries with bad math skills, and lawyers failing to fulfill their fiduciary duties, and they, not the workers, should be made to pay the penalty with their pensions and forced to refund money collected for hours billed.

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