DETROIT (WWJ) – A union attorney says pensions of Detroit city workers are in jeopardy after the city filed for Chapter 9 bankruptcy.
Bankruptcy documents show two public employee pension systems are Detroit’s top unsecured creditors. The city general retirement system’s claim is about $2 billion. The police and fire retirement system is owed more than $1.4 billion.
There are more than 100,000 other creditors that include individual retirees, city workers, banks and property owners.
Richard Mack, Jr., an attorney for AFSCME Council 25, said it’s “shameful” that the Gov. Rick Snyder approved the bankruptcy filing at this time, after promising negotiation with the city’s unions.
“I think it’s despicable, not just as a lawyer but as a citizen of this city. To put my city in bankruptcy simply because you refuse to answer to your actions in a court of law is despicable, and I think every Detroit resident will also find that this action is despicable,” Mack told WWJ Legal Analyst Charlie Langton.
Mack said the quick decision to file for bankruptcy is something the unions will fight, in part because the constitution of the state of Michigan protects retirees.
“The chain in all of this is the governor admits that the reason that he went to bankruptcy court had something to do with the fact that these suits were filed,” he said. “The pensioners went to court in order to get a ruling from a judge that anything done with respect to bankruptcy must be done in the context of the constitution of protections that the pensioners have within Michigan. It’s going to be a dispute over which takes precedence between the federal bankruptcy court’s powers vis-à-vis the Michigan Constitution.”
Speaking live on WWJ Newsradio 950 Friday morning, Gov. Rick Snyder said is concerned about those with city pensions. But, according to him, the bankruptcy will help them.
“One advantage of going to bankruptcy, as opposed to not doing it, is this will give the retirees a more organized way to have representation in this process — so they can have a better seat at the table and a better way to discuss what their needs are versus other creditors,” the governor said. [Listen to the interview HERE].
Mack, however, said the city shouldn’t be factoring in money owed to the pensions as part of their overwhelming debt, which Emergency Manager Kevyn Orr estimates is at a staggering $20 billion.
“In order to file for Chapter 9 bankruptcy you have to demonstrate insolvency, which is defined as being unable to pay your bills, currently owed money. The money that you’re putting into the pensions is not currently owned money, it is money that actuarially you are putting aside in order to prepare for money that you will owe. That’s not money currently owed today, it’s apples and oranges,” he said.
Mack said Detroit’s credit rating will be destroyed now that the city has filed for bankruptcy.
“[Snyder] put the entire region, if not the state, in jeopardy with respect to our ability to borrow, and he did it because he did not want to respond to the questions that a court would pose about his actions,” he said.