Skip to comments.Detroit Files For Bankruptcy (Retirees Outnumber Employees By Over 2 to 1), Judge Bars Pension Cuts
Posted on 07/18/2013 3:00:40 PM PDT by whitedog57
The City of Detroit filed for bankruptcy Thursday in federal court, trying to get out from under billions in debt. If approved it would be the largest city bankruptcy in U.S. history.
The filing was under what is called Chapter 9 of the U.S. code, which allows municipalities to restructure debt under bankruptcy protection. The bankruptcy filing begins a 30-to-90 day period during which the court will determine whether the city is eligible for Chapter 9 and how many creditors will want a piece of the citys limited resources. A city must be insolvent to seek Chapter 9 protection.
Detroit is near the statutory limits of its ability to tax. That power has been dragged down by a drop in the citys population, down 60 per cent from almost 2 million at the peak in the 1950s to just under 700,000. The led to a 40 per cent drop in tax revenues since 2000. The city has had to borrow money to meet its operating budget which has been slashed. With the City retiree pool currently outnumbering active employees by an over-2 to 1 margin and growing, the City must address pension and retiree!healthcare liabilities as part of any comprehensive restructuring. As discussed above in Section 3(b), the City and its advisors are currently evaluating ways to reduce these unfunded liabilities, which involves an evaluation of plan design and benefits offered, to identify potential cost savings.
Faced with the obvious solution of slashing pensions, a Michigan judge (Ingham County Circuit Court Judge Rosemarie E. Aquilina) temporarily barred the states governor and Detroits emergency manager from taking any action that would allow cuts in pension benefits for city retirees.
The Obama Administration quickly responded: We remain committed to continuing our strong partnership with Detroit as it works to recover and revitalize and maintain its status as one of Americas great cities, White House spokeswoman Amy Brundage says in e-mailed statement.
Do I smell a Federal bailout
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