Plan of Adjustment Gains Increasing Support. Detroit’s largest union’s members (AFSCME) have ratified tentative agreements in the Motor City’s proposed plan of adjustment reached during the city’s bankruptcy case. The American Federation of State, County and Municipal Employees Council 25 announced yesterday that its members and other unions completed voting on the tentative contracts this week. In a statement, AFSCME Council 25 President Al Garrett said: “Labor and management have forged a path forward that secures the future for working people and the citizens they serve.” Continue reading


Motor City Pensions & Bargains: The Twilight Zone. Part of the lugubrious process of fairly determining how to divvy up a municipality’s debt in bankruptcy—or what the court’s determine to be “fair and equitable,” involves judicial assessment of claims against said city. The city, in its filing a year ago, listed $18 billion in debt, including $5.85 billion in special revenue obligations, $6.4 billion in post- employment benefits, $3.5 billion for underfunded pensions, $1.13 billion on secured and unsecured general obligations, and $1.43 billion on pension-related debt. The Motor City’s debt service, alone, consumes 42.5 percent of revenue. The city has 100,000 creditors and 20,000 retirees. So it was that yesterday, U.S. Bankruptcy Judge Steven Rhodes listened to claimants against the Motor City—with Detroit asking the court to disallow claims from creditors who they claim have provided insufficient evidence to support their demands. One such claimant, Albert O’Rourke of Oceanside, California, was seeking the paltry sum of $1 trillion, because, he told the federal court, Detroit had lost or destroyed “Manhattan Project” nuclear research materials housed in property he owns in Detroit. Mr. O’Rourke’s filing claimed that amount was based on the price tag for building various nuclear weapons and devices related to the missing materials. In its objections, Motor City attorneys told the court: “Based on the information in the claim and response, the city cannot even determine what the materials are, whether they exist, where they are located and if they exist, who owns them.” Continue reading


What Are Essential Services?Even though the bankrupt City of San Bernardino has reached a tentative agreement with CalPERS in federally supervised mediation, it faces hard choices about deciding which municipal services are essential—or what would define essential services insolvency, as well as other pension related challenges. Continue reading


Tentative Agreement. The City ofSan Bernardino yesterday announced it had reached a tentative agreement with the California Public Employees’ Retirement System (CalPERS) with regard to missed payments related to the its municipal bankruptcy filing; however, in keeping with the mediator, U.S. Bankruptcy Judge Gregg Zive’s gag order, details of the agreement have not been released. According to the statement, San Bernardino and CalPERS “entered into an agreement that addresses payments that the city has begun to make to CalPERS on account of prior deferred payments and the currently stayed eligibility appeal.” Rosanna Westmoreland, a CalPERS spokeswoman, said: “All we can say, because of the confidentiality agreement, is that we reached an agreement and it will be the basis of the plan of adjustment…We have been engaged in extensive negotiations and made significant progress.” Continue reading


Interim Agreement. In a filing late Tuesday with the U.S. Bankruptcy Court, attorneys for the City of San Bernardino and CalPERS advised the court the two sides had “reached an interim agreement regarding various items that will help form the basis for a plan of adjustment.” While the filing provided few details about the agreement, it could mark a significant breakthrough—potentially short circuiting a pending challenge in the 9th U.S. Court of Appeals as to whether the federal municipal bankruptcy law prevails over the California state constitution with regard to public pensions. Indeed, the issue of pensions and CalPERS has been festering in each of the fiscally challenged cities in California, with U.S. Bankruptcy Judge Christopher Klein, who presided over Stockton’s chapter 9 municipal bankruptcy case noting: “We have a festering sore here…We’ve got to get in there and excise it.” San Bernardino—unlike its neighbor Stockton to the north, withheld payments to CalPERS in the wake of filing for federal bankruptcy protection in 2012. Even though it has resumed making payments, the city still owes the pension fund about $13.5 million in back payments, plus interest and penalties. Continue reading


Squash! Michigan Attorney General Bill Schuette yesterday approved the key provisions of the grand bargain, or $661 million plan to enhance public pensions and protect the Detroit Institute of Arts collection from creditors, and requested that U.S. Bankruptcy Judge Steven Rhodes quash a subpoena from holdout creditor Syncora Guarantee Inc. – which is seeking to question the Attorney General under oath about his opinion as part of its fight to sell pieces of the DIA collection for creditors’ benefit. The Attorney General’s opinion determined that the Detroit Institute of Art collection cannot be sold because it is held in a charitable trust.) In his request, Mr. Scheutte wrote that such a subpoena would subject him to an undue burden and possibly reveal privileged material. Judge Rhodes said he would consider the request next week. Continue reading