Massive cuts to street lighting, bus service, DWSD, recreation, land, workers, pensions and health care
No concrete proposals to cut city’s debt, only lip service
By Diane Bukowski
May 16, 2013
DETROIT – Detroit’s Emergency Manager Kevyn Orr painted a nightmarish vision for the city’s future in his May 12 report to Michigan Governor Rick Snyder. It is a vision born on Wall Street and, as Orr admits, imparted to state and city officials who have colluded in the plan, largely through last year’s Public Act 4 “consent agreement.” (Click on Orr report for full document.)
Orr has said the April 4, 2012 “Financial Stability (consent) Agreement,” passed by City Council on the anniversary of Dr. Martin Luther King, Jr.’s assassination, provided a “roadmap” for his plan.
That plan is so drastic one young man who read it, a business administration major at Wayne County Community College, said he could not believe it is real. “It must be a scam,” he remarked. Unfortunately, however, Orr is dead serious.
His Detroit nightmare:
A city with 46,000 instead of 88,000 streetlights.
Large tracts of the city considered to be “surplus” and “distressed” will be left in the dark and possibly sold off. The Public Lighting Department, including its revenue-generating provision of lighting to public buildings, and its electricity grid, will be taken over by an unspecified “third party,” clearly the for-profit DTE. This will take place over a 5-7 year period, raising the question of whether Gov. Rick Snyder will extend Orr’s term beyond 18 months.
More cutbacks in bus service, already operating on a skeleton basis, due to further cuts in city general fund subsidies. The newly-formed Regional Transit Authority just cut D-DOT’s federal funding from 65 percent to 49 percent of the region’s allotment, although D-DOT is the largest system in the area with the most ridership.
The Detroit Water and Sewerage Department subject to huge cuts, regionalization. DWSD will be under the EM’s unfettered control since U.S. District Court Judge Sean Cox dismissed the 36-year federal oversight decree on March 27, 2013, the day Orr was appointed. Water Department unions are challenging Cox’s orders and a “Root Cause Committee’s” recommendations in federal court. These include a possible workforce reduction of 81 percent and further regional control. But Orr will now backstep to the state level, where unions face more reactionary courts.
The city’s remaining 17 recreation centers placed in a “Recreation Trust” operated by an independent board which will introduce “fee-based” service and include private foundations.
City assets may be outsourced, transferred or sold. Regarding the city’s assets (which include Belle Isle, DWSD, etc.), “the City will evaluate all options, including preserving the status quo, entering into partnerships with other public entities, outsourcing of operations, and transferring non-core assets to other private or public entities in sale, lease or other transactions.”
MORE consultants have been hired to review Police and Fire Departments. With regard to both, Orr says there will be “additional investment in IT, infrastructure, equipment, fleet, facilities and personnel.” He also proposes contracting out a central jail to the Michigan Department of Corrections, and “shared services and contracting out, as well as labor efficiencies,” for the Fire Department.
Other city departments will be evaluated to see if they will go the way of the now extinct Health and Wellness, Human Services, and Workforce Development Departments.
Retiree health care benefits, or “low hanging fruit” as Orr spokesman Bill Nowling called them, likely to be eliminated. Orr says they are too expensive, accounting for $200 million from next year’s budget. He claims the total amount over the next 30 years is $5.7 billion.
Pensions are endangered despite state laws guaranteeing them. Orr and a task force are reviewing current actuarial assessments by Gabriel, Roeder and Smith that the General Retirement System is 83 percent funded, with the Police and Fire System 100 percent funded, both at adequate levels. Orr claims, without citing a source, that they are underfunded by $0.6 billion.
He notes that valuations do not include payment on the city’s Pension Obligation Certificates debt of $740 million for DGRS, and $740 million for PFRS. Orr says also that pension funds must comply with new federal GASB reporting guidelines by 2014, which will further diminish their value. He says, “As of June 30, 2011, market values of the plan assets were significantly lower than actuarial values by about $660 M and $428 M respectively (DGRS and PFRS).
In 2008, Mayor Bing proposed giving the $6 billion pension funds to the private Michigan Employee Retirement Systems, which kicks out members funds if they fall below a certain percentage of funding. Under MERS, Highland Park retirees frequently failed to get their checks.
Orr’s plan DOES NOT INCLUDE:
Reparations from the banks and mortgage companies to 235,000 city residents driven out, and to the city, for massive predatory lending and mortgage fraud resulting in illegal foreclosures, as confirmed by a U.S. Senate investigative committee.
Payment of state debt to Detroit estimated at over $300 million, including revenue sharing, corporate debt estimated at $800 million, millions more owed by private entities which have received loans from the CDBG Sec. 108 program. Orr projects an “accumulated unrestricted deficit of $386.6 million for June, 2013, but does not include proceeds from the state escrow account of $137 million. No plan is set forward to collect those debts, which have been acknowledged by State Treasurer Andy Dillon.
Implementation of union plan to cut health care costs by dumping Blue Cross Blue Shield administration of plans, among other proposals, which would ameliorate the alleged $5.7 billion cost of retirement health care.
A MORATORIUM ON THE CITY’S ALLEGED $15 BILLION DEBT TO THE BANKS, which many are challenging as predatory, usurious and illegal, Banks to whom the city owes money, such as UBS AG, are being sued by numerous entities for interest rate-rigging; UBS AG just paid a $1.5 billion fine to the U.S. Department of Justice for such practices.
Orr says the city’s debt is unmanageable, including, “liabilities of approximately $9.4 billion in special revenue bonds, state revolving loans, pension certificates of participation (POC’s), mark-to-market swap liabilities, unlimited and limited tax general obligation bonds and other funded City Debts.”
He alleges the city plans “a range of alternatives that COULD include, among other things, rescheduling principal amortization without reduction in principal to provide near-term debt service relief; permanently reducing the principal amount of debt outstanding . . . reducing interest rates, as appropriate, to achieve targeted cost savings . . .issuing new debt to provide certain cash recoveries to creditors.”
However, Orr’s proposals in this area, unlike those regarding cuts to services, workers, and residents, are vague. He has set up no task force to talk to the banks. He has set up no study group to examine how much of the debt Detroit owes is due to predatory lending (such as the $1.5 billion UBS POC loan), and $437 million in questionable swap liabilities cited in Bloomberg Businessweek’s “Only Wall Street profits from Detroit crisis.”
The city hired Orr’s law firm, Jones Day, as the consultant to deal with debt-restructuring, and Orr says he is meeting with them regularly. Jones Day, however, represents virtually all the banks holding the City’s debt, and its attorneys have a history of representing racist, right wing clients and foundations. Although Orr denies a conflict of interest, even Crain’s Detroit Business blasted the city for hiring Jones Day to assist Orr as emergency manager.
COMPENSATION FOR DISCRIMINATORY WALL STREET CREDIT RATING PRACTICES.
Orr says the city’s credit ratings are at junk levels, B/B by Standard & Poor’s, CCC/CC by Fitch, and Caa1/Caa2 by Moody’s. He does not propose a task force to study whether these agencies conspired with the banks to further rob the city through higher interest rates due to the low scores. The U.S. government is currently suing Standard & Poor’s for such a conspiracy, and there is outrage all over the globe at the credit rating agencies, which are actually PAID by the banks.
In the case of Detroit’s $1.5 BILLION POC loan, representatives of Standard and Poor’s CAME TO THE CITY COUNCIL TABLE IN 2005 TO PUSH THE LOAN, issuing veiled threats that they would downgrade the city’s credit ratings otherwise. Mayor Kwame Kilpatrick threatened to lay-off thousands of city workers if the Council did not agree to the disastrous loan. Later, Wall Street junked Detroit’s credit anyway, and Kilpatrick laid off 1,500 city workers.
AND MANY MORE: JUST PUT “BANKS” IN VOD SEARCH ENGINE.