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Thu Sep 26, 2013, 10:03 AM

Detroit Spent Billions Extra on Pensions


Detroit’s municipal pension fund made payments for decades to retirees, active workers and others above and beyond normal benefits, costing the struggling city billions of dollars and helping push it into bankruptcy, according to people who have reviewed the payments.

The payments, which were not publicly disclosed, included bonuses to retirees, supplements to workers not yet retired and cash to the families of workers who died before becoming eligible to collect a pension, according to reports by an outside actuary and other people with knowledge of the matter.

......

When asked on what legal authority the trustees made the payments, Mr. Harris said, “My understanding was, it had to be approved by City Council, and council was under the belief that the money was there — that the pension funds were earning the money — with the consideration that in bad times the city would be making up the difference. I hate to say that. Ultimately the fund has to be funded by the taxpayers.”

......

And then the city’s contributions were not enough. So much money had been drained from the pension fund that by 2005, Detroit could no longer replenish it from its dwindling tax revenue. Instead, the city turned to the public bond markets, borrowed $1.44 billion and used that to fill the hole. Even that did not work. In June, Detroit failed to make a $39.7 million interest payment on that borrowing — the first default of what was soon to become the biggest municipal bankruptcy case in American history.

http://dealbook.nytimes.com/2013/09/25/undisclosed-payments-cost-detroit-pension-plan-billions/?_r=1&



Disgraceful. Without this kind of malfeasance Detroit probably would not be in the awful position that it is in today.

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Response to Nye Bevan (Original post)

Thu Sep 26, 2013, 10:04 AM

1. Taurine metabolic byproducts.

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Response to hobbit709 (Reply #1)

Thu Sep 26, 2013, 10:05 AM

2. It sure sounds like it (nt)

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Response to Nye Bevan (Original post)

Thu Sep 26, 2013, 10:17 AM

3. A small part of the story, designed to deflect attention from Lansing, Washington and Wall Street.

Last edited Thu Sep 26, 2013, 02:36 PM - Edit history (1)

How Detroit went broke: The answers may surprise you - and don't blame Coleman Young

By Nathan Bomey and John Gallagher
Detroit Free Press Business Writers, Sep. 15, 2013

EXCERPT...

Instead, amid a huge exodus of residents, plummeting tax revenues and skyrocketing home abandonment, Detroit’s leaders engaged in a billion-dollar borrowing binge, created new taxes and failed to cut expenses when they needed to. Simultaneously, they gifted workers and retirees with generous bonuses. And under pressure from unions and, sometimes, arbitrators, they failed to cut health care benefits — saddling the city with staggering costs that today threaten the safety and quality of life of people who live here.

The numbers, most from records deeply buried in the public library, lay waste to misconceptions about the roots of Detroit’s economic crisis. For critics who want to blame Mayor Coleman Young for starting this mess, think again. The mayor’s sometimes fiery rhetoric may have contributed to metro Detroit’s racial divide, but he was an astute money manager who recognized, early on, the challenges the city faced and began slashing staff and spending to address them.

And Wall Street types who applauded Mayor Kwame Kilpatrick’s financial acumen following his 2005 deal to restructure city pension debt should consider this: The numbers prove that his plan devastated the city’s finances and was a key factor that drove Detroit to file for Chapter 9 bankruptcy in July.

The State of Michigan also bears some blame. Lansing politicians reduced Detroit’s state-shared revenue by 48% from 1998 to 2012, withholding $172 million from the city, according to state records.

CONTINUED...

http://www.freep.com/interactive/article/20130915/NEWS01/130801004/Detroit-Bankruptcy-history-1950-debt-pension-revenue

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Response to Octafish (Reply #3)

Thu Sep 26, 2013, 10:22 AM

4. A little over the 4 paragraph limit for excerpts (nt)

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Response to Octafish (Reply #3)

Fri Sep 27, 2013, 09:06 AM

6. Coleman Young Would Be A Hero If He Hadn't Confronted White People About Their Racism

Octafish .. here's a nice follow-up to that excellent free press piece.
Now that the Free Press has scrutinized Coleman Young’s financial stewardship and declared him the “most austere Detroit mayor since World War II,” maybe it’s time to re-examine other aspects of Young’s 20 years in office.

And maybe fair-minded observers will eventually conclude that Young was a much better mayor than his reputation in the 21st Century would suggest. And perhaps we can even agree that Young, at least for the first eight to 10 years of his two decades in the Manoogian Mansion, was even Detroit’s best mayor since the city began its 60-year decline...

In 2009, when Time magazine embedded its staffers in the city for a year, Daniel Okrent, writing the magazine’s cover story, said among the chief reasons “Detroit careened off the road” was “the corrosive two-decade rule of a black politician who cared more about retribution than about resurrection … a talented politician who spent much of his 20 years in office devoting his talents to the politics of revenge.”

That’s an evaluation that is shared by legions of Young critics. Yet such a negative interpretation doesn’t square with the Free Press’ findings that Young probably did more to steer Detroit away from the financial abyss than the eight other mayors who have run Detroit since 1950...

http://www.deadlinedetroit.com/articles/6447/coleman_young_might_be_a_saint_if_he_hadn_t_confronted_white_people_with_their_racism

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Response to MinM (Reply #6)

Fri Sep 27, 2013, 09:18 AM

7. Thank you, MinM! Coleman Young called Ronald Reagan, ''PRUNEFACE.''

Which, I thought, was honestly refreshing for a sitting mayor. The original Pruneface of popular culture was a Dick Tracy villain, a businessman-cum-NAZI agent.



Something else Corporate McPravda fails to mention about the late, great Mayor: He was a pro-union activist, attorney, and Tuskegee Airman who stood up to Joe McCarthy and -- unlike Ronnie Pruneface -- would not snitch on other liberals, progressives, socialists, communists or anyone who was being free to believe in whatever they wanted to believe.

http://www.is.wayne.edu/MNISSANI/ELEPHANT/Young.htm


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Response to Octafish (Reply #7)

Fri Sep 27, 2013, 10:31 AM

8. Speaking of Joe McCarthy, his relationship w/JP McCarthy was interesting

This also brings it back to confronting racism. Coleman Young was a fairly frequent guest on WJR (owned at the time by Cap Cities .. which is a whole separate story). More specifically the JP McCarthy morning show. While my recollection over the years was that these interviews would sometimes get testy, it seemed, for the most part, that they were cordial.

JP McCarthy was one of the smoothest and glib radio hosts I've ever heard and if I recall correctly set some records for being #1 in his market for consecutive weeks/months/years. Looking back on it now though the underlying tension between them seems to have reflected the growing rift between Detroit area business leaders (represented by JP McCarthy) and Coleman Young.

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Response to MinM (Reply #6)

Fri Sep 27, 2013, 10:35 AM

9. This is the sort of delusion that plagues us in Detroit: Coleman Young ran the city in the ground.

It isn't the fault of "the racists" for noticing Detroit is in the state it is in.

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Response to Nye Bevan (Original post)

Thu Sep 26, 2013, 10:33 AM

5. The trustees violated their fiduciary duties.

Liability may extend to actuaries, the plan administrator and other plan professionals.

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Response to Nye Bevan (Original post)

Fri Sep 27, 2013, 10:35 AM

10. Hey look guys--it's a "centrist" trying to deflect attention away from the powerful toward the weak.

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