Democracy Watch: Detroit’s Big Maybe

What can be said with absolute certainty about the so-called plan of adjustment Detroit Emergency Manager Kevyn Orr released last week?

Almost nothing.

It is a plan built on a mountain of ifs.

According to a summary of the plan, “police and fire retirees would likely receive in excess of 90 percent of their earned pensions after elimination of cost of living allowances,” and “general retirees would likely receive in excess of 70 percent of their pensions after elimination of cost of living allowances.”

But that’s only if they agree to give up without a fight and promise no lawsuits in the future. Otherwise the deal gets more stingy, and will be heaped on top of crushing cuts to medical benefits.

Either way, the offer hinges on a promise by Gov. Rick Snyder to deliver $350 million in state money. But that’s a pledge Snyder can’t fill on his own. To actually deliver all those millions, he must convince a legislature that’s controlled by conservatives often hostile to Detroit to actually appropriate the money.

On the other hand, it could be that the pensioners won’t have to take any cut at all. Obscured by all the coverage of Orr’s proposed “adjustments” was news that the U.S. 6th Circuit of Appeals had agreed to consider a case, brought by the city’s two pension systems and others, which challenges the legitimacy of the bankruptcy itself.

A key component of that case is the contention that the Michigan Constitution guarantees the payment of pensions promised to public employees, and that U.S. Bankruptcy Judge Steven Rhodes grievously erred when he allowed those pensions to be placed on the chopping block along with other unsecured creditors.

And just who, really, is an unsecured creditor – meaning one that is subject to the kind of buzz cuts the bankruptcy court will be administering?

As the New York Times reported, it seems unlikely that Wall Street is going to willfully roll over and accept pennies on the dollar for debt it is owed. “While we understand that favoring pensioners and discriminating against bondholders and other creditors may be politically popular, we believe this is contrary to bankruptcy law and will result in costly litigation that will hamper the city’s emergence from bankruptcy,” Steve Spencer, a financial advisor to one of the companies that insures several types of Detroit’s debt, told the paper.

And then there’s a lawsuit Detroit filed claiming that a disastrous deal involving certificates of participation was actually illegal. If the city prevails in that case, it would free itself of $1.4 billion in outstanding debt.

How can any final settlement with anyone be calculated with that big if still hanging out there?

Aside from the virtual certainty that Kevyn Orr and company are going to burn through the $95 million that’s been extracted from departments throughout the city to pay for restructuring costs during the current fiscal year – with much of that money going into the very deep pockets at Orr’s former law firm, Jones Day – what else is considered to be a safe bet in this mess of a bankruptcy?

Well, for one thing, there are the grassroots efforts by a coalition of activists who gathered at the Historic King Solomon Baptist Church on Detroit’s west side. Despite a dearth of media attention, they can be counted on to keep plugging away with their message, which is gradually finding a broader audience. The group held a press conference on Monday to announce a plan of their own, one intended to counteract what Detroit attorney Julie Hurwitz called a “full-scale assault on our constitutional rights and protections.”

The reason they are doing so is laid out in the preamble to the group's People’s Plan for Restructuring Toward a Sustainable Detroit itself, which begins:

“The restructuring and rebirth of Detroit will not be delivered by a state-imposed emergency manager, nor through Chapter 9 bankruptcy proceedings, foundation contributions, closed door deals, or other devious and misleading corporate schemes. Detroit’s rebirth will be the result of the people’s unrelenting demand for democratic self-governance, equal access to and management of the natural and economic resources of the city.”

Anyone interested in learning more about that plan can visit the web site of the group Detroiters Resisting Emergency Management. That plan will be the focal point of a town hall meeting being held on Sunday, March 2 at 3 p.m. at Central United Methodist Church (the corner of Woodward and Grand Circus Park in downtown Detroit).


By Curt Guyette, Investigative Reporter