Never mind 2017; beware of 2024!

**Ray1936** · February-21-17, 06:40 PM

The next seven years will likely be an upswing for the City of Detroit and its citizens. At least, I hope so; fervently.

But come the year 2024, the City will be required to make a baloon payment to the Pension Funds. The current estimate is between $137 to $350 million dollars. The City will not have anything close to that, and Bankruptcy II shall result. [[Estimates provided by Mark Young, President of the Detroit Police Lieutenants and Sergeants Ass'n.).

The City will likely ask the State legislature, a rather disorganized bunch of Yahoos, to rescue them, and they will do all they can, other than to provide cash. Legislation will be brought forth to eliminate pensions, make a token lump sum payout, and forbid health care compensation for active and retired employees.

All in all, it's a doom and gloom scenario. Fortunately, in 2024, I'll be 88 and either in a hospice or a grave, so it probably won't make any matter to me. Other than to cry over what a dynamic, prosperous City Detroit once was.

Just venting. Take your shots.

**ggores** · February-21-17, 07:40 PM

Ray, your fiscal insights are incisive. If I remember correctly, the Detroit Police Department used to be the MOST efficient of any American city because the DPD dealt with a budget and also in the THIRD largest [[correct me if I'm wrong) American City during your time of service.

Yes, that Balloon Payment looms, and the bill will be too big to pay in full by 2024. But, by 2024, there should be a much larger credit card to kick the can down the hill to the 2050 generation.

It's all just like, ummm, "rolling dice" :-)

**MikeyinBrooklyn** · February-21-17, 07:56 PM

I hope the city plans well in the next seven years for that eventuality. Certainly all candidates for mayor need to be asked serious, probing questions about it.

Going forward, I think every single new contract for public employees should cease with pension promises and obligations, and instead kick money in now to individual retire accounts. There is no way to determine the ability or willingness of future voters and taxpayers to chip in to pay the pensions for people who are [[at that point) no longer serving. Expecting that there will always be an ever-increasing pool of people chipping in to cover old losses is literally a Ponzi scheme. We just don't call it that when government does it.

**Junjie** · February-21-17, 10:44 PM

Originally Posted by ggores

Ray, your fiscal insights are incisive. If I remember correctly, the Detroit Police Department used to be the MOST efficient of any American city because the DPD dealt with a budget and also in the THIRD largest [[correct me if I'm wrong) American City during your time of service.

Yes, that Balloon Payment looms, and the bill will be too big to pay in full by 2024. But, by 2024, there should be a much larger credit card to kick the can down the hill to the 2050 generation.

It's all just like, ummm, "rolling dice" :-)

Not at all what's important in this thread, but since you said "correct me if I'm wrong" - Detroit peaked at 4th behind NYC, Chicago, and Philadelphia, which was over 2 million at its own height.

**Ray1936** · February-22-17, 11:52 AM

Originally Posted by Junjie

Not at all what's important in this thread, but since you said "correct me if I'm wrong" - Detroit peaked at 4th behind NYC, Chicago, and Philadelphia, which was over 2 million at its own height.

Detroit proper never hit two mil. The 1950 census came in at 1.8 million, making the city the 4th largest in the U.S. In 1960 many were shocked to find the total at 1.6 million. That was due to urban renewal and freeway building, and it's been downward ever since.

**Packman41** · February-22-17, 12:38 PM

Hello Ray:

I hate to tell you this, but I think you and Mark Young are correct. Here is link to a December 12, 2016 Freep article warning of the same thing:
http://www.freep.com/story/news/loca...ents/95209736/

One of the more important quotes:

“As it stands now, the city is projecting payments under an assumption the pension funds will earn 6.75% annually on their investments — a target missed in the last couple years.

· Detroit's General Retirement System earned 1.97% returns in the fiscal year ending in June 2016 and 3.1% the year prior.

· The city's Police and Fire Retirement System earned returns in the last two years of 2.87% and 3.76%, respectively.

If underwhelming investment returns become a trend, the city could be on the hook to make annual payments beginning in 2024 significantly more than the $167 million currently projected.

For example, if the 6.75% expected annual return is replaced with an assumption of 4%, the city's pension payment in 2024 would be $252 million. Under an assumption of a 2% gain, the payment would be $301 million….”

Meanwhile the City Pension Funds are not alone with “underwhelming” investment returns: “The Michigan Public School Employees' Retirement System had a 1.5% return in the year ending in June 2016. The pension fund for Philadelphia city employees earned 1.4% for the year ending in October 2016.”

So, you need to track those annual investment returns. Because if the returns average 4.0% instead of the 6.75% target, then the City of Detroit needs to increase their funding in 2024 by 51% from $167 million to $252 million annually.

**sirrealone** · February-22-17, 12:51 PM

As someone in my early 40's it's worth pointing out that most people my age will never have to worry about how our pensions will be funded since, you know, we don't get pensions anymore.

**Ray1936** · February-22-17, 05:48 PM

Packman, those figures look correct. Of course, with little inflation during the last ten years, interest rates are marginal, at best. Same thing goes with my bank savings account, which pays me far less than 1%.

Good stuff you posted. Well, not good, but accurate, anyway.

**401don** · February-22-17, 06:52 PM

Ray I have full confidence that in 2024 you'll be whistling for your self-driving car to come take you to the casino to see that nasty old lady Madonna in concert.

**Ray1936** · February-22-17, 07:37 PM

Originally Posted by 401don

Ray I have full confidence that in 2024 you'll be whistling for your self-driving car to come take you to the casino to see that nasty old lady Madonna in concert.

Well, two out of three ain't bad. But who's Madonna??????

**DetroiterOnTheWestCoast** · February-22-17, 08:17 PM

Originally Posted by Ray1936

Packman, those figures look correct. Of course, with little inflation during the last ten years, interest rates are marginal, at best. Same thing goes with my bank savings account, which pays me far less than 1%.

You could open an online Ally Bank savings account and get 1%!

But getting back to the topic, didn't Mayor Duggan say last year that they were going to at least chip away a bit at this hole by contributing an additional $10,000,000 for a few years?

**Packman41** · February-22-17, 10:14 PM

Originally Posted by DetroiterOnTheWestCoast

...<snip>...didn't Mayor Duggan say last year that they were going to at least chip away a bit at this hole by contributing an additional $10,000,000 for a few years?

Yes, Duggan did say that in last year’s State of the City Address as described in this FREEP article: http://www.freep.com/story/news/loca...city/80813476/

“He said he will ask the City Council to approve $10 million in extra pension payments in the current budget and another $10 million in the 2015-2016 budget when he presents the budget to the council later this week.”

But who knows if that was ever done?

The above article raises another question for me. It says, “But the actuarial assumptions used turned out to be inaccurate and outdated, raising the 2024 payment to $196 million.” Now that is $31 million more than the FREEP article dated December 12, 2016 that I posted earlier today. Wonder what got them down from $196 million then to $167 million now?

And while $10 million you mention is a lot to you and me, it is small in comparison to the $167 million to $196 million to $252 million [[?) the City must pay in 2024 and every year thereafter for the next 20 years.

Right now they've only saved up $30 million, so it is a long way to go.

Calltoaction · February-22-17, 10:27 PM

2024? BAHAHAHAHAH muthafucker, you need to be worried now.

The national debt is over 18 trillion, that's trillion with a t.

And we just elected a president that's expected to raise our debt more than we could possibly pay for. Pensions are chump change HAHAHAH, that shit won't exist anymore, start packing your bags for Canada.

**ABetterDetroit** · February-22-17, 11:17 PM

Liberals screaming about the evil empire...whoops, Russia, and that the national debt will be our undoing! What's next are they going to want creationism taught in all schools?

**Packman41** · February-23-17, 04:07 PM

Hello Ray:

According to an article in the Detroit News today, it appears that the City actually has a plan to save money for that 2024 target date.

http://www.detroitnews.com/story/new...ents/98306422/

They want to create a retiree protection trust fund separate from other city finances and increase contributions now. Goal is to have $90 million in the fund by the end of 2017, make large [[$15 to $60 million) contributions each year and then have $377 million saved by 2023.

Glad to see they are addressing this now as you can never forecast investment returns.

Only downside I see comes from this quote, “Councilman Scott Benson said Thursday he wants assurances the protection fund will be managed by a city-based minority firm. ‘I’m very concerned about who manages that money,’ Benson told Duggan.”

Yeah me too. However, they should be looking for the BEST investment managers – period. The last time the two pension funds were looking for real estate investment managers they had the same special priorities as Scott Benson wants now and we all know how that worked out.

Look at the millions lost and the number of people that went to prison. Just do a Google search using the words “pension fraud” and then add one of the following names: Robert Schmake or Michael Farr or Abner McWhorter or Chauncey Mayfield or Roy Dixon - I could go on.

**Ray1936** · February-23-17, 09:50 PM

I'm usually optimistic, Packman, but I still view the situation cautiously, despite the assurances of the city mucky-wucks. Past history has shown reckless investments that cost bundles, and it's hard to forsee pure hearts in the years ahead. But we shall see. Hopefully.

Still smarting from the loss of healthcare, although I'm fortunate and have Medicare. Remember that police and fire personnel did not pay into SS or Medicare and those who did not work for a number of years after retirement do not get Medicare at all. Those guys are hurting.