About that DIA rescue...

[BankruptcyGuy]

I'd say off the cuff that these assets are just as unique as the State-constitutionally-guaranteed pension 'promises'...and nobody has done a thing to protect those who need 'em fulfilled to survive. I'm softening the language only to simplify, I know pensions are not merely promises.

Both the ownership of the art and the infallibility of the pensions have been questioned; neither are an absolute. So is the $500ish million a good deal for the art, knowing that they are the subject of litigation? Is the pension settlement a good deal, knowing that Judge Rhodes has indicated that pensions are not, in his mind, unbreakable?

I think what's tough about these negotiations is that they are unlike collective bargaining. You can't sit down at the table and hold out for better, knowing it really won't get worse than the last offer. In this case, because there are other creditors seeking the same assets, if you hold out, you might get significantly less. I hope the ballots are clear on that issue.

[BankruptcyGuy]

Any sale of DIA holdings would require bankruptcy court approval.
Such as sale would not be considered "in the ordinary course of business."

That is not true. Once any asset is sold, however, distribution of the proceeds in an inequitable way would be the subject of an objection before the BK court.

[BankruptcyGuy]

So, once again I ask...is it legal? Seems some other folk want to know, too.

http://motorcitymuckraker.com/blog/2...l-expert-says/

Professor Skeel's analysis is founded on one incorrect fact. He is presuming that, if the DIA art is not sold to the trust as suggested, that it would be sold to some other party. That's false--the art would simply not be sold, for political, legal and practical reasons. And the judge can't force it.

The standard is, "would this creditor be better off if the plan were not approved?" I think the City has made a pretty compelling case that, without debt relief, they run out of cash, city services continue to be cut, people leave the city, tax revenues fall, and on and on. I suppose a creditor could make the case that none of these things would happen even if a plan weren't approved, but that's a pretty tough burden in our fair city.

The creditors' better argument is a lack of fairness of the plan; bankruptcy courts are, after all, courts of equity.

I think some people are seeing the similarity to the GM bankruptcy case. There is a difference in bankruptcy between a plan where new money is injected and where it is not. In those cases, the objecting creditors were unsuccessful in suggesting that the cash-contributing party change the rules of their contribution. That's not one of the options. The judge simply will weigh what the creditor would get under the cash-contribution option compared to what it would get without the contribution at all.

Professor Skeel is a smart man, but he's been misled or misinformed on that point.

[corktownyuppie]

Professor Skeel's analysis is founded on one incorrect fact. He is presuming that, if the DIA art is not sold to the trust as suggested, that it would be sold to some other party. That's false--the art would simply not be sold, for political, legal and practical reasons. And the judge can't force it.

The standard is, "would this creditor be better off if the plan were not approved?" I think the City has made a pretty compelling case that, without debt relief, they run out of cash, city services continue to be cut, people leave the city, tax revenues fall, and on and on. I suppose a creditor could make the case that none of these things would happen even if a plan weren't approved, but that's a pretty tough burden in our fair city.

The creditors' better argument is a lack of fairness of the plan; bankruptcy courts are, after all, courts of equity.

I think some people are seeing the similarity to the GM bankruptcy case. There is a difference in bankruptcy between a plan where new money is injected and where it is not. In those cases, the objecting creditors were unsuccessful in suggesting that the cash-contributing party change the rules of their contribution. That's not one of the options. The judge simply will weigh what the creditor would get under the cash-contribution option compared to what it would get without the contribution at all.

Professor Skeel is a smart man, but he's been misled or misinformed on that point.

I vote misinformed. He totally lost me once he started comparing the 20% gen. oblig. bondholder payout to the 96% pensioner payout without any distinction about the pension being paid from both the trust [[which is pretty decently funded) and the city [[via unfunded liability).

And then when you start looking at the standard of ""would this creditor be better off if the plan were not approved?", the pension settlement suddenly gets more justifiable because if this things goes all the way to the supreme court I'd argue that everyone would get far less to work with.

[Gannon]

Wow, thanks folks. BankruptcyGuy, I owe you a drink or two, at least, for that illuminating post.

Cheers!

[renf]

Many commentators suggest that Detroit retirees will take only a 5 percent cut in pensions. That is misleading. No or minimal adjustements for inflation will, in the future, substantially reduce their benefits. Furthermore, it appears that Kevyn Orr's plan calls for very substantial reductions in
OPEB. Has anyone enumerated exactly what the typical OPEB are for the average retiree and how much they will be cut?

[Honky Tonk]

Many commentators suggest that Detroit retirees will take only a 5 percent cut in pensions. That is misleading. No or minimal adjustements for inflation will, in the future, substantially reduce their benefits. Furthermore, it appears that Kevyn Orr's plan calls for very substantial reductions in
OPEB. Has anyone enumerated exactly what the typical OPEB are for the average retiree and how much they will be cut?

My current working wage doesn't allow for inflation, current or in the future. Neither do the returns on my investments. What you're citing here, IMO, is old school thinking, type pensions. Those days are over, my friend.

[Wesley Mouch]

Many commentators suggest that Detroit retirees will take only a 5 percent cut in pensions. That is misleading. No or minimal adjustements for inflation will, in the future, substantially reduce their benefits. Furthermore, it appears that Kevyn Orr's plan calls for very substantial reductions in
OPEB. Has anyone enumerated exactly what the typical OPEB are for the average retiree and how much they will be cut?

OPEB [[Other Post Employment Benefits) are not pensions. They were discretionary kindness by compliant city officials who were preparing for their own retirements.

[mwilbert]

My current working wage doesn't allow for inflation, current or in the future. Neither do the returns on my investments. What you're citing here, IMO, is old school thinking, type pensions. Those days are over, my friend.

This is irrelevant to whether removing that benefit means that the pensioners are taking a cut. It does, regardless of whether you or anyone else gets such a benefit. I would also point out that most retirees [[but not some of the city pensioners) get Social Security, which does have a COLA. And if that were taken away, it would be a cut in benefits.

This is a separate question from whether such a cut in Detroit retirees benefits is appropriate under the current circumstances, which I think it probably is.

[BankruptcyGuy]

This is irrelevant to whether removing that benefit means that the pensioners are taking a cut. It does, regardless of whether you or anyone else gets such a benefit. I would also point out that most retirees [[but not some of the city pensioners) get Social Security, which does have a COLA. And if that were taken away, it would be a cut in benefits.

It's also an open question whether removing COLA adjustments violates Section 24 of the Constitution. I think the stronger argument is that it does not.

OPEB is mostly healthcare, and there is case law pretty much on point saying those benefits are not protected by the Constitution.

[corktownyuppie]

There's some bipartisan momentum behind this thing. Certainly pensioners being asked about the pension cuts are coming it at it from the the perspectives of what they, as individuals, are going to lose. And the question of whether the COLA cuts should also count as cuts is irrelevant. I think the more important perspective is the broader, global look.

He pointed out to the committee that the bankruptcy mediations have resulted in the city’s obligation for retiree health care dropping from $4 billion to $450 million. Under the Grand Bargain, the $3.5 billion in pension claims is reduced to the $820 million contribution in the deal, Taylor said.

When looked at in this way, you can see that there is no question that the pensioners are gonna be taking their lumps, even with the settlement.

The fact that a GOP state congressman from Oakland County [[Birmingham) is indicating an openness to the settlement is also a positive sign. More details here:

Detroit's Recovery and Michigan's Future


John Walsh [[R) Committee Chair, 19th District
Earl Poleski [[R) Majority Vice-Chair, 64th District
Michael McCready [[R) 40th District
Thomas Stallworth [[D) Minority Vice-Chair, 7th District
Harvey Santana [[D) 9th District
_____________________________
Rachel Meade, Committee Clerk
517-373-2002

http://www.nextchapterdetroit.com/051414-from-lansing-heres-what/