Detroit thread. Post Kwame, Monica, and $1 houses here.

[Admiral Yi]

Defined benefit employment linked pensions of the type we are discussing are not social insurance vehicles.  They pay out based on length of employment and amount of yearly salary.

[garbon]

This might not sound like a lot to residents of a city less dysfunctional than Detroit, but there were only a couple dingy bars, ghetto Chinese restaurants and liquor stores in Midtown a decade ago.  The change came about, in part, because the city offered workers incentives to move to Midtown, and, in part, because the current incarnation of the city council and city bureaucracy isn't as able to stymie and delay progress while waiting for bribes as their predecessors.

Actually I've never been and that sounded pretty remarkable to me for Detroit.

[Savonarola]

Obama's Affordable Care Act could lift a financial burden off Detroit

By JC Reindl and Robin Erb

Detroit Free Press Staff Writers

As Detroit confronts a possible municipal bankruptcy, the forthcoming rollout of President Barack Obama's health care law could be the city's lucky break.

Emergency manager Kevyn Orr has proposed moving younger retired city workers who do not yet qualify for Medicare out of their city-sponsored health plans and into the new federal system, which takes full effect Jan. 1.

The city's Medicare-eligible retirees — generally those age 65 and older — also would give up their current coverage plans and switch over to Medicare.

Detroit is only the second major city, following Chicago, to propose shifting the financial burden of its retiree health care obligations to the new exchanges.

Under the Affordable Care Act, anyone who lacks insurance can go shopping for coverage on state-run health care exchanges starting Oct. 1.

State government has refused to reveal the pricing on the plans to be offered, claiming the information is not yet public record. But Orr's office acknowledges that retiree benefits under both the Medicare and non-Medicare scenarios will be somewhat less generous than now.

Orr's spokesman, Bill Nowling, told the Free Press that the emergency manager's team believes it has the legal prerogative to unilaterally enact these changes to retiree health care.

If plans proceed, Detroit could be on the leading edge of a trend for cash-strapped local governments.

"I think this is an option that many other local and state governments are going to start looking at," said Alex Rosaen, a senior consultant at East Lansing-based Anderson Economic Group. "The main obstacle to doing this is seeing what the political and morale reaction is among the government workers."

But if enough governments and businesses opt to place their under-65 retirees onto the new Internet-based marketplaces, called state insurance exchanges, the prices of available policies could rise with the higher age of these shoppers, said Gary Claxton, vice president of California-based Kaiser Family Foundation, which tracks changes created by health care reform.

"Someone who is 60 is going to be more expensive than someone who is 35, even if their expenses are average for that age," Claxton said.

Orr's restructuring of retiree health care is projected to lower Detroit's bill for post-employment benefits from $185 million — about 15% of total city revenues — down to between $27.5 million and $40 million. The city would still devote some money for retiree health care because it would offer various monthly subsides for supplementing the new coverage.

The pre-Medicare group of retired workers — 7,585 of the total 19,389 — would join millions of consumers across the country who, lacking employer-sponsored health coverage or Medicaid eligibility, can start shopping in October for an individual policy.

Much like travel websites that compare airline tickets and hotel room prices, the online marketplace will allow individuals, families and business owners to sort through policies. Families and individuals would answer questions about their income to determine eligibility for tax credits or publicly-funded coverage through Medicaid.

But unlike shopping on Priceline or Travelocity, consumers may have to pay fines if they do not buy something on the exchange.

With just three months until the exchanges' launch date, the Obama administration is making a final push to get the marketplace operational and the word out to consumers.

A Government Accountability Office report warned last month that the exchanges might not be ready by October. But federal officials insist that they will make the deadline.

This week, the government relaunched www.healthcare.gov, a one-stop information center that will house Michigan's health insurance exchange.

"That's a really good sign. It shows that insurers are interested and are thinking that people are going to sign up," said Phillip Bergquist, director of operations for the Michigan Primary Care Association, a collection of health centers whose uninsured and under-insured patients may be able to find affordable coverage on the exchange.

As many as 14 policies in Michigan will offer a variety of rates and coverage levels.

There will be a sliding scale of federal subsidies for those whose annual family income falls between 100% and 400% of the federal poverty level. The poverty level is currently $11,490 for a single adult and $23,550 for a family of four.

An additional 470,000 Michiganders who are currently uninsured but too poor to buy subsidized insurance on the exchanges could still get health care coverage, but only if the Republican-controlled state Legislature approves a Medicaid expansion for individuals whose income is between 100% and 133% of the poverty level.

State officials are still reviewing the 14 coverage proposals submitted this spring. Each plan must offer "essential health benefits," such as hospitalization, maternity and pediatric care, wellness care and prescription coverage.

So far, Orr's plan is not sitting well with many retirees, many of whom accepted lower salaries in exchange for good retirement benefits, according to Richard Mack, a lawyer for city unions.

"They didn't show up to work to do anything more than to earn a dollar and do the best job they could, and to deny them their compensation is deplorable," Mack said.

Last year, the bankrupt city of Stockton, Calif., dropped health coverage for all of its retirees. The city reached a settlement last month to pay 1,100 of them a $5.1-million lump sum, representing about 2% of the value of their lost benefits, according to news reports.

Health care centers and other organizations in Michigan will soon learn whether they qualify for federal funds to hire outreach workers and federally-trained navigators to help the public understand the online exchange.

The federal government will operate Michigan's exchange as a result of state lawmakers' decision to not appropriate grant money for a joint state/federal partnership. Michigan consumers will be talking to a national call center, for example, if they have questions about the coverage plans.

Previously the pensioners had a "Cadillac" plan and, at least until recently, didn't have to contribute a portion of their pension to that fund.  The schadenfreude of Republicans and the wailing and gnashing of teeth of Democrats over former union members being forced onto Obamacare on the Freep's forum is amusing.

[Savonarola]

And here's how not to defuse a scandal:

In texts, Pugh appears to beg teen's mom not to go public

Councilman asks teen's mom to stop TV interview

Detroit — As the City Council prepares to replace Charles Pugh, text messages reveal the council president pleaded with the mother of a teen he mentored to quash the airing of a TV interview he claimed would force his resignation and "destroy my chances of ever working in Detroit again."

"I feel like I've run out of options to even have a normal life. Or even live," said a text message sent from Pugh's phone on June 18.

The mother has accused Pugh of having an inappropriate relationship with her 18-year-old son through Pugh's leadership program at Frederick Douglass Academy and has threatened to sue. On Saturday, she filed a police report in Madison Heights, where she said an incident between the two occurred. She has declined to comment further, saying she wants police to investigate.

The Detroit News obtained the text messages from a source close to the mother and confirmed through another source that it was once Pugh's phone number. The number is now disconnected.

Pugh's staff said Tuesday he still was not in and they were unsure who, if anyone, from the office would be speaking on his behalf. They were also unaware whether Pugh had retained an attorney. He has not been seen at City Hall for about two weeks.

In other texts, Pugh appears to tells the mother that the media will "pit you against me on TV FOR RATINGS!"

"I've ended the program at (Frederick Douglass Academy)," the text message said. "I'll do anything else you want me to do. Please don't allow them to move forward with your interview. This would DESTROY me."

He also appears to tell her how the story will play out.

"I don't know that we should do this to boost their ratings and give them more money," according to the text. "Can we please talk? ... I can meet y'all somewhere for dinner. Maybe we can go to church together on Sunday and pray together."

Meanwhile, City Council put off electing new leadership until Tuesday's formal session. Members said they want a written recommendation from the city's law department about how to replace Pugh.

The council also will choose a new president pro tem to replace Gary Brown, who resigned last week to take a $225,000-a-year job on Emergency Manager Kevyn Orr's restructuring team.

Councilman Andre Spivey said after Tuesday's meeting he's looking forward to closure to get past what's become a "side distraction" to conducting city business.

"One might say it's a bit of a distraction," Spivey said of the continued absence, which comes after Pugh's $76,000 salary, duties and title were stripped last week by Orr.

As of Tuesday, Pugh had not submitted a resignation to the council or City Clerk's offices, staffers said.

Council member Brenda Jones, who requested the legal opinion about how to proceed with replacing Pugh, said she wants to proceed cautiously.

"He was elected by the people, by the charter, that indicated the person with the highest vote would be the president," Jones said. "He has not resigned to this date. I still have a concern of just stripping him from his presidency." "

Madison Heights Police Lt. Robert Anderson said detectives began investigating the report on Monday that alleges "inappropriate contact" between Pugh and the teen in a parking lot between May 29 and 31. The boy's mother and her attorneys have said that Pugh and the teen met in September, when he was 17.

Anderson said Tuesday that police have not yet scheduled an interview with the teen and did not have any additional information.


From The Detroit News: http://www.detroitnews.com/article/20130702/METRO01/307020075#ixzz2XzjaYuw9

Now no one has ever accused Pugh of being a political genius, but he should have learned from Kwame's scandals not to text embarrassing information.

[Savonarola]

Will the Bankers hearts go three sizes next Wednesday?

Stephen Henderson: Kevyn Orr to load bankers in a bus, show them Detroit's worst neighborhoods
12:04 AM, July 4, 2013   



Orr's bus route will take the bankers through Brightmoor, where hundreds of abandoned homes and businesses populate gap-toothed blocks that used to teem with residential and commercial activity. / Andre J. Jackson/Detroit Free Press file photo

By Stephen Henderson

Detroit Free Press Editorial Page Editor


Detroit emergency manager Kevyn Orr will load a group of about 25 bankers on a city bus next Wednesday, and lead them on a tour of some of Detroit's most desperately blighted areas. / Eric Seals/Detroit Free Press


Detroit emergency manager Kevyn Orr, locked in a tense standoff with creditors whom he has asked to accept a fraction of the $11.4 billion they're owed, will load a group of about 25 bankers on a city bus next Wednesday, and lead them on a tour of some of Detroit's most desperately blighted areas.

They'll start downtown at Grand River Avenue, and travel out to Brightmoor, where hundreds of abandoned homes and businesses populate gap-toothed blocks that used to teem with residential and commercial activity. Then the tour might also cut across 7 Mile to the east side, and come back down Gratiot, a hollowed thoroughfare that runs through the 48205 ZIP code, which led the city in shootings and homicides in 2011.

The idea? To prick the consciences of the city's creditors, and raise some empathy capital with them in hopes that they'll avoid forcing Detroit into bankruptcy.

"If they can see what it's like for Detroiters, what they endure every day in this city, I think they'll begin to understand what's at stake," Orr said after an interview he gave during a taping of the Detroit Public Television show "MiWeek." (I cohost the show with broadcaster Christy McDonald and Detroit News Editorial Page Editor Nolan Finley.)

"Imagine what it's like to be a mother riding that bus with no air-conditioning, that shows up late and takes an hour and a half to get you where you need to go. See what these neighborhoods look like, what you travel through and go home to every day. I think people don't really believe it when I describe it. Even my friends in Washington say it can't be as dire as what I'm describing. But it is."

Orr said if the creditors don't take the deal he has offered, the city's conditions — the blight, the lack of services, the profound deterioration of once-thriving neighborhoods — could get worse. "I need them to see that up-close," he said.

All of the city's creditors — which include institutions like Bank of America and Financial Guaranty Insurance — were invited to take the tour. Orr spokesman Bill Nowling said Wednesday that he expected about 25 to participate.

The leverage Orr is seeking here could be key in his negotiations to avoid having Detroit file the largest municipal bankruptcy in history.

Last month, he laid out a plan to shave billions off what the city owes most of its creditors and redirect the money Detroit spends servicing its huge debt toward service enhancement. It was the first time in my memory that any leader in Detroit has suggested putting residents' needs first — before the interests of the banks or, for that matter, the public employees whose costs have also drained city coffers.

Orr stopped paying the city's unsecured creditors in mid-June, and would like to settle their $11.4 billion in claims with about $2 billion.

The municipal finance markets have reacted quite coolly to Orr's offer, principally because of how he has defined which creditors are unsecured.

In most municipal restructurings, banks and investors who have issued general obligation bonds on behalf of a government (money cities typically use for capital investments like infrastructure) are considered secured, and given preferential treatment in payouts. But Orr has said because their security interest is tax revenue, and Detroit is at its maximum allowable tax rate, those debts are unsecured, at least in Detroit's case.

According to an article in the Bond Buyer, a trade publication that tracks municipal finance issues, some creditors fear that if Detroit can reclassify general obligation bondholders as unsecured, it could set a precedent for other cities and send financial shock waves throughout the municipal bond market.

So Orr has some real convincing to do if he's going to have his way, and his tour is a pretty bold stab at putting Detroit's financial woes into important context.

"There are other cities with these problems, yes, but there's nothing like what we're facing in Detroit," Orr said. "I don't think you can consider this a precedent because of the depth of the problems here. It's just different."

Will a tour be enough? It's definitely unconventional. Creditors, typically, are about money. We owe it; they want us to pay it. They answer to investors, who are concerned with returns.

But I also think the reality that Orr wants them to see is a shocker. Those of us who live here have become inured to what it's like to drive through the city's neighborhoods for the first time; the conditions you can find in any urban center, but the depth and breadth of it? Nowhere else.

Orr said he hopes the creditors start to see the connection between the debt they're owed and the survival of residents. "I hope they start to see that no city should be like this," he said. "Not in America.

For the average Detroiter it's hard not to think of the Yeats' line:

No likely end could bring them loss   
Or leave them happier than before.

With regards to a bailout, a deal with creditors or a bankruptcy.  For this reason I don't think Orr's tactic here will work any better than trying to scare the bankers into taking pennies on the dollar.  If this is how the city looks after years of living beyond its means, how will it look after Orr forces them to live within their means?  Is bankruptcy going to be that much worse?

[Savonarola]

Plenty of places to shock Detroit creditors on bus tour

Laura Berman

Kevyn Orr arrived in Detroit three months ago, clear-eyed, focused and radiating certainty: He could, he would convince creditors and unions to understand, and to agree, on a settlement that avoids bankruptcy.

Now he's betting that his Wednesday city bus tour of Detroit can jolt hard-nosed creditors out of balky reluctance and into accepting his offer of a settlement: More or less, 10 cents on the dollar. Call it Orr's Inferno.

His itinerary isn't public yet but its intent is clear: This isn't your Chamber of Commerce or D-Hive bus tour of cute shops, 1930s Art Deco architecture or the splendor of the Riverwalk. This tour is meant to convince Detroit's hapless lenders that the city's coffers of wealth are few and untouchable (see the Detroit Institute of Arts) but its sources of tsuris (trouble/suffering in Yiddish) are endless.

There will be no spin through DanGilbertville, with its Ping-Pong tables in the park and its youthful work force of international brainiacs, urban visionaries and mortgage peddlers. No lunch at the Rattlesnake Club or drinks at the Whitney. No docent tour of the DIA.

Instead of showcasing the city's assets, most contained within a few square miles, he's likely to pilot that bus to the outer 130 — to jolt these gimlet-eyed bankers into the unique reality of Detroit. Every city has abandoned buildings, but only Detroit has 70,000 of them. Here, then, are a few suggestions for a shock-and-awe tour of Detroit that skips the niceties.

1. Load the bus in the afternoon, so the shadows grow long, highlighting the lack of street lighting. Then head for Brightmoor, one of Detroit's notorious neighborhoods, where an ambitious blight-clearing project has pushed aside a wall of trash symbolizing the enormity of the task ahead.

2. Head east on Gratiot to Grandy Street, one of hundreds of Detroit streets with expensive new wheelchair ramps that lead to nowhere. The curbs are wheelchair accessible; the sidewalks are mostly impassable, choked with weeds, fallen trees and broken concrete. The surrounding area is largely vacant.

3. Chat with citizens. Start with Leola Wesley, who paid $810 in city taxes last year for the privilege of living next to vacant lots and burned-out streetlights. Last year, she was the only resident on her block near Chalmers who paid any city taxes. She's a taxpaying rarity in a city where almost half the owners of the city's 305,000 properties didn't bother to pay their taxes in 2012, as News reporters Christine MacDonald and Mike Wilkinson revealed in February. The numbers shocked Gov. Rick Snyder, who appointed Emergency Manager Orr soon after.

4. Hit the road and keep driving, from Mt. Elliott to Jefferson, across Van Dyke, from the sulphurous bowels of Delray to the post-industrial world of Warren at Livernois. Let them see grass that's taller than Iowa corn, mountains of tires strewn in empty lots, packs of wild dogs, stands of wild pheasants. Most of all, let them see the scale of Detroit, a city like no other, in all of its contradictions and heartbreaking disrepair.

They're bankers; this isn't about heart — it's strictly an appeal to the head.

Finally, take them to the DIA and Slows — so they can't say you're a withholder — and let them loosen their ties or kick off their pumps. Over a Cass Ave. Amber Ale, in the flickering light, let them at last consider how resourceful and generous you are to offer even 10 cents on the dollar.


From The Detroit News: http://www.detroitnews.com/article/20130705/METRO01/307050036#ixzz2YBv0rabg

If I wanted to show someone the real Detroit, I'd show them Zug Island:



I went to graduate school at Wayne State, about five miles from there.  On the upper floors of the library one could usually see a pillar of orange flame billowing from the island.  It must have been at least 30 ft. (10 m) tall.  Unfortunately Zug Island is privately owned and Sauron doesn't let just anyone visit.   

Delray is a good choice too.  One of my brother's co-workers (when he was as Agricultural Inspector at the Ambassador Bridge) described it as the only place he's ever seen someone smoking crack in broad daylight.

[Savonarola]

Alea iacta est

Tom Walsh: Will Detroit go bankrupt? Orr says the answer may already be in the cards
 
By Tom Walsh

Detroit Free Press Business Columnist

Kevyn Orr, Detroit's emergency manager, told the city's nine Financial Advisory Board (FAB) members Monday that he wants them to remain in place for quite a while as an oversight body after he leaves town in 15 months.

But Orr, showing flashes of irritation and impatience with creditors and labor unions, also declared that by the next FAB meeting Aug. 19, it may already be crystal clear whether Detroit's about to become the largest American city to enter Chapter 9 bankruptcy.

"To be honest with you," Orr said, "I'm not going to spend much more time" rehashing scary numbers and jousting with creditors such as Syncora Guarantee, a debt insurer Orr sued last week for trying to trap casino tax payments to the city. "The die are cast, the game has begun."

When I asked Orr if he expected to decide by mid-August about a Chapter 9 filing, he replied, "I think that's fair. I will know. Whether or not we'll have gone (into bankruptcy by then), is another issue — but I will know whether or not that is the path we may have to choose.

"I don't really see the value in spending a whole lot of time going back and forth. The situation is dire," he said. "Our obligations continue to increase ... That's why I keep saying I'm running out of time. I've got to start calculating even now an exit strategy and a calendar for what it's going to take for me to get this done if I do have to have a (bankruptcy filing). I can't afford to waste another 30, 60, 90 days — so yes, this week is pretty crucial."

The FAB, chaired by banking executive Sandy Pierce, was formed in April 2012 to oversee the Financial Stability Agreement between the State of Michigan and the City of Detroit. The appointment of Orr as a high-powered EM in March raised questions about the future role and responsibilities of the FAB, as it did with Detroit's mayor and other elected officials.

Orr told the FAB board Monday that he wants it to remain in place well after his 18-month term as EM ends, citing as an example the longevity of the Municipal Assistance Corp., formed to shepherd New York City through a financial crisis in the 1970s. The MAC was in place from 1976 to 2008, in part linked to the 30-year life of bonds issued as part of that rescue.

Orr doesn't think the FAB needs to exist in Detroit that long. Pierce said he expects to work with the FAB on a revision of the fiscal turnaround priorities in the 2012 stability agreement.

Former City Council President Pro Tem Gary Brown, who joined Orr's office as Detroit's chief compliance officer last week, addressed the FAB briefly Monday, saying his role will chiefly be to upgrade the internal controls, training and level of service provided by city departments.

"There's been no investment in our people, no investment in our processes, no investment in our technology," Brown said, citing the past weekend's failure of police and EMS dispatching communications as a result.

FAB member Glenda Price, former president of Marygrove College, voiced the exasperation of fellow FAB members and many a Detroiter when she said, "These deficiencies have been identified in the past. We identify problems, but we never fix them!"

Whatever one thinks of Orr or the emergency manager law, Detroit's revival will ultimately depend on reversing the decades of dysfunction that have led to Price's plaintive cry.

Whether it's Orr or Gov. Rick Snyder or a bankruptcy judge or the next elected Detroit mayor that calls the short-term shots, it will be the long-term follow-through that counts.

Ambac Assurance has just issued a statement saying they oppose Orr's plan to treat general obligation bondholders the same as unsecured creditors.  Bankruptcy seems to be inevitable.

[Jacob]

You're nuts. The 401k is maybe the best thing our government created in the 20th century. 

Perhaps for the small percentage of the population with both the wealth and the financial knowledge to use them effectively. As a matter of social policy - to support the population in retirement- it is grossly inadequate; relying on it is basically a recipe for disaster.

... at least according to the pension actuaries I've spoken to on the subject.

[Jacob]

As an investment vehicle, it's not bad.  I'm certainly doing very well with it.  As a social insurance vehicle, which is what pensions are supposed to be, it's a disaster.  In a few decades we'll have a huge class of retirees barely subsisting on their Social Security checks.

I hadn't even read your post when I posted my reply, but yeah... exactly.

[derspiess]

Perhaps for the small percentage of the population with both the wealth and the financial knowledge to use them effectively.

Wow, I'm in an elite group of wealthy, financially knowledgeable people & didn't know it! 

[Jacob]

Defined benefit employment linked pensions of the type we are discussing are not social insurance vehicles.  They pay out based on length of employment and amount of yearly salary.

As a whole retirement relies on Benefit Plans + Social Security + Savings.

In the last few decades there's been a large scale transfer from DB to DC plans, transferring significant risk to individuals.

A DB plan is not the same as social security, no. But pension legislation and regulation is social policy, the purpose of which is to act as a social insurance vehicle for the population and provide adequate retirement for the population as a whole. American policy on that front - with the transition to DC over DB (and the ability of individuals to access and lose the DC plan contents prior to retirement) means that huge swathes of Americans who traditionally were not of a social class who would end up in poverty on retirement are going to do so now.

Turning pensions into a primarily individual responsibility may be ideologically sound, and it may have done wonders for the economy (I don't know if it has); but as a matter of economic reality it has left the majority of Americans in the lurch when it comes to their retirement.

[Jacob]

Wow, I'm in an elite group of wealthy, financially knowledgeable people & didn't know it! 

You do now

[garbon]

Turning pensions into a primarily individual responsibility may be ideologically sound, and it may have done wonders for the economy (I don't know if it has); but as a matter of economic reality it has left the majority of Americans in the lurch when it comes to their retirement.

Well many are also in the lurch when their company disappears or can't afford to pay out the pensions.

[Admiral Yi]

Jacob: if I'm reading your post correctly, your biggest beef with DC plans seems to be the ability to take money out and spend it before retirement.

[DGuller]

Jacob: if I'm reading your post correctly, your biggest beef with DC plans seems to be the ability to take money out and spend it before retirement.

I don't think you are, if I'm reading Jacob's post correctly.