Press TVDetroit officials are trying hard to restructure the city’s $18-billion debt by significantly cutting local workers’ pensions and payments to bondholders, US media reports.
Officials filed the city’s bankruptcy plan on Friday.
“The plan contemplates the city’s emergence from Chapter 9 this year and represents a crucial step toward the city’s rehabilitation and recovery from a decades-long downward spiral,” said a statement explaining the plan for the largest municipal bankruptcy in US history.
It is to invest around $1.5 billion over the next decade to improve city services, according to the statement.
The plan treats various classes of creditors differently, according to Los Angeles Times. It proposes reducing benefits to retired police and fire beneficiaries by 10 percent while other city employees and retirees could see pensions reduced by around 34 percent.
The plan proposes giving additional benefits to those pension holders most in need, the statement said.
Labor unions were quick to criticize the big cuts.
“The proposed plan of adjustment is a gut punch to Detroit city workers and retirees. The plan essentially eliminates healthcare benefits for retirees and drastically cuts earned pension benefits. Retires cannot survive these huge cuts to the pensions they earned. The plan is unfair and unacceptable,” said Al Garrett, the president of AFSCME Council 25.
Tina Bassett, spokeswoman for the city’s pension funds, said, “We are greatly disappointed that the plan contains debilitating and unnecessary cuts to …pension benefits,” adding that Detroit “can afford much better treatment to the people who have dedicated years of their lives in service of the city.”
The plan is still a long way from winning approval of the court, but if it is approved, 24,000 retired workers will suffer cuts in pensions and health benefits.
Detroit sought bankruptcy protection last year after, as it struggles with rampant crime, poor city services and an estimated 78,000 abandoned buildings.
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http://www.presstv.ir/detail/2014/02/21/351710/detroit-bankruptcy-plan-cuts-pension-benefits/