Municipal Bonds

Detroit's Pensioners Have Their Day in Court


K.D. Bullock, 70, retired from the Detroit Police Department and concerned about his pension, in his home in Detroit, on July 23

Photograph by Paul Sancya/AP Photo

K.D. Bullock, 70, retired from the Detroit Police Department and concerned about his pension, in his home in Detroit, on July 23

Bankruptcy court can be dry and technical, but today the courthouse in Detroit was all emotion. In a hearing, dozens of the city’s pensioners and residents had a chance to speak directly to Judge Steven Rhodes, who is determining whether Detroit is eligible for bankruptcy. Dispatches from reporters at the courthouse describe a proceeding marked by stories of personal anguish rather than the usual legalese.

As we reported last month, many pensioners submitted handwritten pleas to the court before an official deadline for creditors to challenge the bankruptcy filing. The letters largely decried the controversial plan offered by the city’s emergency manager, which would cut their promised payouts. In the bankruptcy, the retirees are represented by the city’s two pension funds, but today’s hearing, which was a follow-up to letters, was a rare chance for the pensioners themselves to address the judge.

Robert Snell, a reporter for the Detroit News, described the testimony of Sheilah Johnson, who said she worked for the city for 28 years and now collected a $3,000 pension each month:

She complained about businesses failing to pay taxes and other debts owed to the city. Johnson, a black woman, tried to get the city’s bankruptcy case dismissed by arguing the city is not bankrupt.

“We are not bankrupt,” she said. “Anyone who believes that, believes I am white.” She started to cry while recounting a conversation with her grandson.

“He said, ‘grandma, are they trying to make us slaves again?’” she said. “This is not a dictatorship. I am not a slave. I earned my pension.”

The Detroit Free Press reported on the testimony from Olivia Gillon, a 34-year veteran city worker:

Gillon, who worked for the City of Detroit for nearly 34 years before retiring in 2002, said banks should not be given “preferential treatment” over retirees. She criticized Orr’s plan to cut pensions and health-care benefits.

“It seems like he’s putting the onus for fixing the city’s problems on the retirees,” Gillon said. “And most of us were not even involved in the decisions that were made in the process that got the city into the trouble that it’s in now.”

Bloomberg News says some said pensioners would be forced to take cuts while bondholders would be better paid:

Others attacked banks and investors who loaned the city money. “Here’s a list of all the fraud that I found on the Web,” resident Michael D. Shane said, holding up a fistful of printouts. Many objectors repeated the claims made by city unions that the case should be thrown out because Orr intends to cut employee pensions that are protected by Michigan’s constitution.

At the end of the hearing, the judge called the testimony “democracy at its very finest” and promised to urge the governor to listen to the hearing and understand how residents felt. The judge will hold another, undoubtedly less emotional, hearing next month, for creditors who are represented by lawyers.

Weise_190
Weise is a reporter for Bloomberg Businessweek in New York. Follow her on Twitter @kyweise.

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