DETROIT (AP) — The city of Detroit reached tentative
agreements to preserve pensions for retired police office and
firefighters but cut monthly payments for other former employees, key
deals that could accelerate the largest public bankruptcy in U.S.
history, officials said Tuesday.
Negotiators for the general
pension fund, which pays benefits to retirees who didn’t work in public
safety, agreed to a 4.5 percent cut and the elimination of
cost-of-living payments, fund spokeswoman Tina Bassett said.
Despite
the cuts, it’s a vast improvement over the drastic 26 percent reduction
that had been proposed by Detroit emergency manager Kevyn Orr, who is
guiding the city through the bankruptcy process.
"This was the best possible agreement we could make," Bassett told The Associated Press.
Hours
earlier, a group representing retired police and firefighters said it
had reached its own deal to preserve pension benefits but slightly trim
cost-of-living payments.
Together, the agreements would cover more
than 20,000 Detroit retired workers. Those retirees, as well as
thousands of active employees who qualify for a future pension, will get
an opportunity to vote as creditors in the bankruptcy in the weeks
ahead. Judge Steven Rhodes also needs to review the deal as part of
Detroit’s broader plan to emerge from bankruptcy by fall.
Orr’s spokesman, Bill Nowling, declined to comment on the announced deal with the general pension fund.

Earlier
Tuesday, Nowling said Detroit believes it can afford the deal with
retired police and firefighters partly because their pension fund’s
financial performance has improved along with Wall Street markets.
"Sooner
or later reality sinks in," Don Taylor, president of the Retired
Detroit Police and Fire Fighters Association, told The Detroit News.
"The city’s in bankruptcy so you have to do the best you can for the
majority of your members."
Association attorney Ryan Plecha said preserving the pension benefits was the "crown jewel."

Both
pension deals are contingent on Detroit getting $816 million from
foundations, philanthropists and the state of Michigan. Lawmakers still
haven’t approved the state’s $350 million share, which has been endorsed
by Gov. Rick Snyder.
The pot of money would prevent the sale of
city-owned art and be earmarked solely for retirees who draw benefits
from the two pension funds.
The average annual pension for police
and fire retirees now is $32,000, while most other retired city workers
get $19,000 to $20,000.
"Judge Rhodes will not approve a plan that
over-promises," bankruptcy expert Doug Bernstein said. "They are
definitely going to have to back up their numbers."
Detroit filed for bankruptcy last July, citing $18 billion in unmanageable long-term liabilities.
The
city last week settled with holders of $388 million in bonds, agreeing
to pay 74 cents for each dollar owed. Separately, the judge signed off
on an $85 million agreement that releases Detroit from a disastrous debt
deal made years ago that carried high rates of interest.
___
Follow Ed White at http://twitter.com/edwhiteap
Copyright 2014 The Associated Press. All rights
reserved. This material may not be published, broadcast, rewritten or
redistributed.