Detroit pensioners helped bankrupt the city: report
More than two months after Detroit filed the biggest municipal bankruptcy in US history, a report is coming to light that puts part of the blame on the city’s pension fund.
The Detroit pension fund for municipal workers reportedly made several extra payments to the city’s retirees (and non-retirees), a move that eventually helped push Detroit to bankruptcy. While little is known about how much each person received, the value of the additional payments amounted to nearly $2 billion over 23 years. According to Mary Williams Walsh of the New York Times, “available records suggest that the trustees approving the payments did not discriminate; nearly everybody in the plan received [the extra payments].”
Tina Bassett, a spokesperson for Detroit’s pension trustees, said the extra payments had been negotiated by the city and its unions after both sides established an internal account to set aside additional earnings. According to Bassett, the retirees deserved to benefit from the investment gains because they had paid into the pension fund, and because they were having a hard time making ends meet. However, the city likely won’t see it that way. According to municipal bankruptcy expert James E. Spiotto, it’s conceivable the city could sue the pension fund or try to retrieve the money via bankruptcy rules concerning fraudulent conveyances.
Detroit’s nearly 12,000 retired general workers received an average pension of $19,213 last year. Total excess payments in some years ran more than $100 million, a crushing figure for a city that has been struggling to pay its debts.
The once mighty motor city filed for Chapter 9 bankruptcy on July 18, defaulting on nearly $20 billion worth of debt. Detroit, which was once the world’s fastest growing city, has seen its population decline by more than 60 percent since 1950.
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