Detroit’s “grand bargain” settlement will keep the retirees’ reduced pension checks coming for the rest of their lives, but the pension system that the settlement leaves behind has some of the same problems that plunged the city into crisis in the first place, the New York Times reported today. Under Detroit’s “grand bargain,” foundations, the state of Michigan, the Detroit Institute of Arts and even the city’s water and sewer system have pledged hundreds of millions of dollars to bolster the municipal pension system and give the art collection new, bankruptcy-proof ownership. In return, retired workers accepted reductions to their monthly checks and other cutbacks. Like many other public systems, it relies on a funding formula that lags the true cost of the pensions, and is predicated on a forecast investment return that Judge Steven W. Rhodes sharply questioned during the trial on Detroit’s bankruptcy plan. Moreover, if Detroit finds itself confronting another fiscal crisis in the near future, it can no longer tap the museum’s art collection, which many saw as its top asset.
http://dealbook.nytimes.com//2014/11/11/detroit-emerges-from-bankruptcy…
In related news, one of Mayor Mike Duggan's top lawyers suggested on Monday that Detroit's bankruptcy plan could collapse if legal fees come in higher than estimated, a claim that upset U.S. Bankruptcy Judge Steven Rhodes, the Detroit News reported yesterday. Judge Rhodes engaged in a tense exchange with Charles Raimi, the second-ranking attorney in the Detroit Law Department, three days after the judge approved a plan for Detroit to shed $7 billion in debt. Raimi has not been involved in Detroit's bankruptcy case, which was handled by the outside law firm Jones Day. Raimi wanted more time to review legal fees charged by Jones Day, which is pushing for quicker approval so that the city can exit bankruptcy court by Thanksgiving. Raimi said that there is concern about total fees exceeding $130 million and the unexpected cost ripping a hole in Detroit's debt-cutting plan. Legal fees topped $140 million last month and will continue to climb in coming weeks. Judge Rhodes wants mediators to determine the reasonableness of legal fees charged by Jones Day and a team of consultants that worked on Detroit's bankruptcy.
http://www.detroitnews.com/story/news/local/wayne-county/2014/11/10/det…