CHICAGO - The board representing a major Detroit civilian retiree group voted in favor of supporting Detroit's proposed plan of adjustment.
The vote by the board of directors for the Detroit Retired City Employees Association to support the proposed treatment of pension and health benefits for retired general city employees was announced Friday.
"The DRCEA's leadership and its counsel were actively involved in all aspects of the mediation process over retiree pension and health benefits, and the support of DRCEA is significant [as it's] the city's largest employee association with almost 8,000 members" or about 75% of Detroit's eligible general retirees," read a statement from bankruptcy mediators.
The vote is significant in that the association will likely press its retirees to vote in favor of the plan of adjustment when ballots are distributed to creditors.
DRCEA secured a modest increase in benefits above those negotiated with other general retiree groups. Under the agreement, impacted retirees will see a 4.5% cut in current pension benefits and lose their cost-of-living adjustments, the mediators said. The COLA can be restored depending on the performance of the general retirement system under the plan of adjustment.
The board's support for the plan of adjustment advances the city's efforts to resolve $18 billion of debts and exit the largest ever Chapter 9 bankruptcy. The city's emergency manager, Kevyn Orr, has said he hopes to exit bankruptcy this fall.
In recent weeks, Detroit has agreed to deals with a series of key creditors, and various employee groups have agreed to support the plan of adjustment. The General Retirement System and the Police and Fire Retirement System and Official Committee of Retirees have agreed to back the plan.
The latest mediated agreement with the civilian retirees group is reliant on full funding of the so-called "grand bargain," in which the state contributes $350 million over the next two decades to reduce pension cuts and shift the Detroit Institute of Arts museum to independent status, avoiding the sale of its currently city owned fine art.
A tentative settlement with the city's unlimited-tax general obligation bondholders calls for a 74% recovery. It has not settled yet with its limited-tax GO holders, however, and is proposing repaying them roughly 10 cents on the dollar. The city also wants to impair its water and sewer bonds, though repaying 100% of its principal, and invalidate entirely $1.4 billion of certificates of participation issued to boost its pensions.
The case is being heard by U.S. Bankruptcy Judge Steven Rhodes.
Rhodes on Friday granted Detroit's request to extend the deadline to file an amended disclosure statement until Monday afternoon, according to published reports.