ONLY WALL STREET WINS IN DETROIT CRISIS REAPING $474 MILLION FEE

 

Much of Detroit's streets look like this one in Highland Park, which shows Cassandra Cabil at her home after Highland Park cut a deal with DTE to remove half the city's street lights. Under a new Public Lighting Authority, 40 percent of Detroit's street lights, many already gone, will also be permanently removed. The blame lies with Wall Street.
Much of Detroit’s streets look like this one in Highland Park, which shows Cassandra Cabil at her home after Highland Park cut a deal with DTE to remove half the city’s street lights. Under a new Public Lighting Authority, 40 percent of Detroit’s street lights, many already gone, will also be permanently removed. The blame lies with Wall Street. Photo: Carlos Osorio

 (VOD has taken the liberty of re-publishing this entire article, which clearly lays out the role Jones Day clients, including UBS AG, SBS Financial Services, BOA’s Merrill Lynch, and JP Morgan Chase, in what continues to amount to the gang rape of Detroit. Detroit’s City Council will vote Tues. April 9 on a costly “debt-restructuring” contract with Jones Day. Council members should read this and beware. The article confirms much of what VOD has already written over the last two years.)

Bloomberg BusinessweekBy Darrell Preston & Chris Christoff – Mar 13, 2013 8:24 PM ET

The only winners in the financial crisis that brought Detroit  to the brink of state takeover are Wall Street bankers who reaped more than $474 million from a city too poor to keep street lights working.

The city started borrowing to plug budget holes in 2005 under former Mayor Kwame Kilpatrick, who was convicted this week on corruption charges. That year, it issued $1.4 billion in securities to fund pension payments. Last year, it added $129.5 million in debt, 9.3 percent of its general-fund budget, in part to repay loans taken to service other bonds.

Michigan Gov. Rick Snyder announces appointment of Kevyn Orr as Detroit EM March 14, 2013.

Michigan Gov. Rick Snyder announces appointment of Kevyn Orr as Detroit EM March 14, 2013.

Detroit, which is trying to avoid becoming the largest U.S. municipal bankruptcy, struggles to serve residents after revenue declined when the auto industry collapsed and the city began to empty. Michigan ’s Republican governor, Rick Snyder, [has named] an emergency manager, who will have to address debt and derivatives taken on in the last eight years.

“We have no lights, no buses, poor streets and now we’re paying millions of dollars a year on our debt,” said David Sole, a retired municipal worker and advocate for Moratorium Now Coalition, a Detroit group that fights foreclosures and evictions. “The banks said they need to be paid first. But there is no money.”

Dave Sole of Moratoriun Now! speaks at rally against EM March 6, 2013.

Dave Sole of Moratoriun Now! speaks at rally against EM March 6, 2013.

The city, which peaked at 1.85 million residents in 1950, has lost more than a quarter of its population since 2000. The 700,000 inhabitants who remain endure unreliable buses, inadequate police and fire protection and broken street lights that have darkened entire blocks.

Covering Shortfalls

Banks including UBS AG (UBS), Bank of America Corp.’s Merrill Lynch and JPMorgan Chase & Co (JPM) have enabled about $3.7 billion of bond issues to cover deficits, pension shortfalls and debt payments since 2005, according to data compiled by Bloomberg. Liabilities rose to almost $15 billion, including money owed retirees, according to a state treasurer’s review.

The debt sales cost Detroit $474 million, including underwriting expenses, bond-insurance premiums and fees for wrong-way bets on swaps, according to data compiled by Bloomberg. That almost equals the city’s 2013 budget for police and fire protection.

Protesters rally outside CAYMC in Detroit as EM takes office March 25, 2013.

Protesters rally outside CAYMC in Detroit as EM takes office March 25, 2013.

The largest part is $350 million owed for derivatives meant to lower borrowing costs on variable-rate debt.

Municipal borrowers from the Metropolitan Water District of Southern California to Harvard University in Cambridge, Massachusetts, have paid billions to banks to end interest-rate swaps that didn’t protect them. In the bets, a municipal issuer and another party exchange payments tied to interest-rate indexes.

‘Pay Later’

“The banks promise to get you the money and say you can pay later,” said Greg Bowens, spokesman for Stand Up For Democracy, a Lansing group that campaigned last year to repeal the law allowing appointment of a financial manager. “They get their fees off the top, and you trust that they’re doing what’s in your taxpayers’ best interest.”

Moratoriun Now and Occupy Detroit protect the home of a Detroiter facing foreclosure.

Moratoriun Now and Occupy Detroit protect the home of a Detroiter facing foreclosure.

As banks were collecting fees from bonds, some targeted city homeowners with subprime loans that led to foreclosures, depressing real-estate values and tax revenue, Sole said. About one-quarter of Detroit’s housing units are vacant, according to Detroit Future City, a 50-year blueprint for recovery. In some areas, entire blocks are deserted. Properties have been stripped of plumbing, wiring and whatever can be sold.

The home town of General Motors Co. (GM) has been running general-fund deficits of $155.4 million to $331.9 million since 2005, when Kilpatrick was mayor, and has been firing workers to save money.

Killing Fields

Last year, it cut police staffing by 11.6 percent to 2,836, according to budget documents. Killings spiked. Detroit had 411 homicides last year, up 9 percent from 2011.

Stephen Murphy of Standard and Poor's (r) and Joe O'Keefe of Fitch Ratings sell Detroit City Council on %1.5 billion UBS AG loan in 2004.

Stephen Murphy of Standard and Poor’s (r) and Joe O’Keefe of Fitch Ratings sell Detroit City Council on %1.5 billion UBS AG loan in 2004.

On March 11, Kilpatrick, a Democrat, was convicted on corruption and fraud charges. He and co-conspirators executed a “wide-ranging racketeering conspiracy involving extortion, bribery and fraud,” U.S. Attorney Barbara McQuade said in a statement.

Kilpatrick’s attorney, James Thomas of Detroit, declined to comment.

While his client ran Detroit, the city embarked on two of its most expensive bond issues, first paying $46.4 million in fees to UBS and others to borrow $1.4 billion for pension obligations.

A year later, the city paid $61.8 million, including insurance costs, for UBS to sell $948.5 million in bonds, replacing two-thirds of the debt sold the previous year.

Some pension debt traded at about 65 cents on the dollar in the most recent trade Feb. 12, according to data compiled by Bloomberg.

Wrong-Way Bets

ubs-photo-articleInlinesbs logoDetroit also entered into swaps contracts with UBS and SBS Financial Products Co., which serves as a counterparty on swaps transactions.

The arrangements are a bet on the direction of interest rates and can raise costs if they move unexpectedly.

Detroit CFO Jack Martin Aug. , 2012.

Detroit CFO Jack Martin Aug. , 2012.

Rates fell, leaving a liability of $439 million on June 30, 2012, according to a city report. That has fallen to about $350 million as rates went back up, said Jack Martin, Detroit’s chief financial officer.

The borrowing “likely contributed to our current problems,” said Martin, who took his job in May, 2012. “It was the way people did business back then. We are where we are now and working hard to right the ship.”

The city makes periodic swap payments from money generated by casinos.

Public Interest

Wall Street firms could end the deals and call for full payment because Moody’s Investors Service last March cut unlimited general-obligation bond ratings to B2, five levels below investment grade, according to the city’s 2012 financial statement. In November, Moody’s cut the rating again, sending it down two levels to Caa1.

The cuts mean there is “significant risk in connection with the city’s ability to meet the cash demands” under the swap, according to Detroit’s financial report. Continue reading


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GREEK GENERAL STRIKE BATTLED IMF AUSTERITY MEASURES; EM TO BRING SAME TO DETROIT

General strike in Greece against austerity including "debt-restructuring" IMF policies. Banner reads: Stop Austerity, Growth Now. Greeks protested is every major city.

General strike in Greece against austerity including “debt-restructuring” IMF policies. Banner reads: Stop Austerity, Growth Now. Greeks protested is every major city.

 

workers world logoBy G. Dunkel on March 1, 2013

(VOD: The Detroit City Council is to vote Tues. April 9 at 10 a.m. on a costly “debt-restructuring” contract with Jones Day, the world’s third largest law firm, whose clients include most of the major banks which hold the city’s debt. In Greece, Italy, Spain, France and other countries, people have held general strikes and mass shutdowns to protest similar policies.)

Just days before an inspection team was due to check that Greece’s new austerity measures were in place, tens of thousands of workers took to the streets on Feb. 20 and shut the country down. The strikers made it clear that “reforms” that leave patients without health care and drugs, students without education, taxpayers without money, families with no one employed, workers without labor rights and 68 percent of the youth without jobs are really attacks on the Greek people and their standard of living. (Greek Reporter, Feb. 20)

Police hold Greek farmers with vehicles back in protest in Patras, Greece Feb 20

Police hold Greek farmers back during protest in Patras, Greece Feb. 20, 2013

The inspection team is from the Troika — the European Union, the International Monetary Fund and the European Central Bank — which offered its first bailout to Greece in 2010 after three years of recession. The Troika offers only more austerity.

As an example, the minimum wage was cut by 22 percent in 2012 from $989 a month to $772 and just $673 for youth, with another 10 to 15 percent decrease due in 2013.

Protest in Athens at Parliament Building Feb. 20, 2013

Protest in Athens at Parliament Building Feb. 20, 2013

What’s worse is that, according to the General Confederation of Greek Workers (GSEE) relying on official statistics, only 600,000 workers out of 1.5 million employed in the private sector get a regular paycheck. Most employers in Greece pay anywhere from 3 to 15 months late; workers keep on working in the hopes of getting back pay or at least severance.

Many of the workers getting minimum wages are in the private sector.

Protest marches took place in 70 cities, with large demonstrations on the island of Crete, and one action attracting 18,000 participants in Thessaloníki, Greece’s second largest city. Farmers, whose access to credit is under attack by the Troika, actively blocked, in particular, the highway between Athens and Thessaloníki.

Youg woman in Feb. 20, 2013 protest in Greece.

Youg woman in Feb. 20, 2013 protest in Greece.

In Athens, two demonstrations followed the same route, ending at Syntagma Square in front of the Greek Parliament, both with similar demands. The Greek Communist Party (KKE) supported the All-Workers Militant Front (PAME) union confederation’s march and the other march by the GSEE, together with the Civil Servants’ Confederation. The main press services of France and Germany both reported significantly from 50,000 to 60,000 participants.

According to AFP, the main banner carried by PAME read, “No to modern sweatshops, hands off collective labor agreements.”

KKE General Secretary Aleka Papariga led a large KKE delegation at PAME’s demonstration. She told the crowd: “The working people who are suffering must take a decision. To discover their strength and advance combatively, towards the rupture and overthrow, to the very end. Otherwise, they will find themselves trapped against the wall.”

At the other march, the GSEE, the union movement close to social democratic parties, explained: “We are fighting for collective bargaining agreements, for measures to be finally taken against unemployment and to ensure our democratic and working rights.” Some of PAME’s demands made the same points.

One of hundreds of protests in Greece over the last several years.

One of hundreds of protests in Greece over the last several years.

Syriza, a major presence in the GSEE/ADEDY march, is an electoral coalition of social democratic and left parties which heads the opposition. Syriza said it wanted to use the strike as a springboard to force out the coalition government led by the conservative prime minister, Antonis Samaras. “The general strike aims to bring down the government and annul (the austerity) agreement and measures,” Syriza said in leaflets handed out this week.

Greek President Karolos Papoulias, whose role is symbolic, commented, “We are faced with a societal explosion if any more pressure is put on society,” ruminating, perhaps, over the constant barrage of pay cuts, tax hikes and slashed pensions that he nonetheless supports. (Greek Reporter, Feb. 20)


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TIGERS OPENING DAY FREEWAY SLOWDOWN: NO TO EM TAKEOVER OF DETROIT!

Uploaded by DetroitEvolution

(VOD editor Diane Bukowski: Thanks to those brave souls who held this slowdown on Tigers’ opening day April 5. I have personal sympathies based on the fact that I work part-time in a downtown location squarely in the midst of tail-gating and drunken suburban mobs, on Bagley near Grand Circus Park. From 6 a.m. to 2 a.m. that night, Tigers fans spent the day in parking lots and streets and sidewalks around our building getting completely blasted, openly drinking alcohol (illegal), urinating in the streets and on our building, then coming INTO our building. Someone kicked down the locked door to a non-functioning toilet on my floor, and defecated in it anyway, leaving a terrible odor. If this had been a BLACK mob, police would have hauled away hundreds, cracked heads, and probably shot a few.  But there were no police to be seen. This added insult to injury on top of the EM appointment, and made it difficult for me to leave the office to service my homeless clients.)


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WHY OBAMA’S SOCIAL SECURITY CUTS ARE OUR WAKE-UP CALL

Don't push seniors off the Fiscal Cliff

Huff Post politics 2By Richard (RJ) Eskow 04/07/2013

Falling income. Unaffordable colleges. A dying middle class. Young people without hope. The greatest economic inequality in modern history.

And yet, in the midst of the Long Depression, we’re told that the president intends to cuts Social Security.

Pres. Barack Obama proposes cuts in Social Security, Medicare

Pres. Barack Obama proposes cuts in Social Security, Medicare

According to reports, the new presidential budget proposal will also include job-killing spending cuts and a Medicare cost hike that will increasingly affect the middle class with every passing year.

The president says this isn’t his “ideal plan,” but he doesn’t say what his ideal plan would look like — and he certainly isn’t fighting for a better one. He also claims his budget offers “tough reforms,” which rings of self-satisfaction rather than sorrow.

He’s decided on his next move. What’s yours?

This budget represents a moral challenge for everyone, especially those of us who voted for him. I’ve already gone here to let my elected officials know that I unconditionally oppose these budget cuts.

Death by a Thousand Cuts

Call it ‘the unkindest cut of all.’ What makes the chained CPI particularly unkind is the fact that millions of Americans have already had their Social Security benefits cut. Benefits are determined based on a person’s lifetime earnings, so any significant loss in income now results in a benefit cut later. (More details here.)

chained-cpi-cut-social-security

Long-term unemployment is a benefit cut. A stagnating wage is a benefit cut. Wealth inequity is a benefit cut.

How many more cuts can the American people stand?

A Deep Cut

How big is the president’s chained CPI cut? For someone who retires at 65, it would be:

a 3.7 percent cut at age 75;
a 6.5 percent cut at age 85;
and a 9.2 percent cut at 95.

What about the dollar cost of the president’s cut? For the average earner, cumulative benefits would be cut by:

$4,631 — more than three months of benefits — by age 75;
$13,910 — nearly a year of benefits — by age 85;
and $28,004 — more than a year and a half of benefits — by age 95.

Unless the president’s budget excludes the chained CPI from IRS calculation, it would also lead to tax increases for all income except that in the highest tax bracket. So his Social Security cut would also be a middle-class tax hike.

All the President’s Cuts

medicare1Despite its severity, reports tell us that the chained CPI isn’t this budget’s only harsh austerity measure. The president will also propose increasing Medicare premiums for higher earners. The figure that’s been reported is $47,000 per year. That targets comfortable seniors, not just the wealthy.

In less than 25 years, that more than one retired person in four would be paying an increased Medicare premium. (See the Kaiser Family Foundation’s analysis for more.) This cost hike wouldn’t do anything to reduce runaway health care costs. It’s just cost-shifting.

The president’s budget also includes some plain, old-fashioned austerity. According to reports, the new Obama budget calls for $400 billion in cuts to health programs, along with cuts to federal employees’ retirement programs, the Post Office, and farm programs.

That follows the European model of cutting budgets during a Long Depression. Hey, what could go wrong? Continue reading


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PRIVATIZING DETROIT WATER & SEWERAGE DEPT. WILL COST CUSTOMERS DEARLY

Borrowing TroubleCover-231x300
New Food & Water Watch Analysis Highlights Public Costs Associated With Water System Privatization Deals

April 4, 2013

Contact: Tia Lebherz, Food & Water Watch, (313) 486-1356 tlebherz@fwwatch.org

Detroit, Mich. – As Emergency Financial Manager Kevyn Orr works to balance Detroit’s budget in the wake of a state-declared financial emergency, reports indicate he may attempt to raise cash by privatizing Detroit’s drinking water and wastewater systems.

Tia Lebherz

Tia Lebherz

But Borrowing Trouble: Water Privatization Is a False Solution for Municipal Budget Shortfalls, released today by the consumer advocacy organization Food & Water Watch, shows that taxpayers ultimately suffer when water systems are privatized, and that leasing or selling these essential systems simply masks, not alleviates, local budget shortfalls.

“Privatizing Detroit’s water and sewer system will do nothing to alleviate the city’s financial problems,” said Tia Lebherz, a Detroit-based organizer for Food & Water Watch. “Doing so would amount to a one-shot ploy to obscure larger money woes, and would ultimately come back to haunt residents in the form of higher bills.”

Although more than 80 percent of water systems worldwide are publically owned and controlled, the collapse of global financial markets in the 2000s has led many governments around the world to consider privatizing these assets through arrangements such as concession contracts, where a municipality retains ownership of a system, but the corporation that has assumed control is responsible for setting rates and financing system upkeep.

People's Water Board Coalition protest outside Detroit Water Board building Aug. 21, 2012.

People’s Water Board Coalition protest outside Detroit Water Board building Aug. 21, 2012.

In these deals, the private company will give a local government what is effectively an upfront loan for control of its water system, while ratepayers, not the municipality, are expected to repay the loan through rate increases and other fees.

Because ratepayers must repay the loan from the company leasing their water system, water bills will increase. The more money a local government receives from the deal, the more households and local businesses will pay through their water bills.

The late Mary Shumake protests with the Michigan Welfare Rights Coalition in Detroit.

The late Mary Shumake protests with the Michigan Welfare Rights Coalition in Detroit.

“Water privatization would disproportionately affect poor and working class families across Southeast Michigan who are already unable to keep up with water rate increases,” said Ann Rall of the Michigan Welfare Rights Organization. “Our water system should provide the highest quality service at the most affordable price to ensure that all can have access to safe drinking water and sanitation. The regressive rate hikes that would occur with privatization would place an unfair burden on those less able to pay. Privatization would also increase the already-staggering level of unemployment in this region.”

Concession contracts are far more expensive than the common form of government borrowing on the municipal bond market. The upfront loan can have an interest rate of 14 percent or higher, while local government debt typically has an interest rate of about 4 percent. For similar reasons, concession contracts have also been shown to drive up the cost of system improvements, adding $0.8 million to $2.5 million onto the total cost of every $1 million investment.

Detroit Wastewater Treatment Plant workers on strike Sept. 30, 2012

Detroit Wastewater Treatment Plant workers on strike Sept. 30, 2012

“In Detroit, both the Emergency Financial Manager and the Board of Water Commissioners have expressed that they are interested in pursuing the privatization of DWSD, either through the sale or lease of the system,” said Ken Gray, member of AFSCME Local 207. “However, we know, and this report confirms, that such an irresponsible and short sighted decision will not create a balanced budget but rather will dig Detroit into a deeper hole of long term financial instability.”

Food & Water Watch recommends that Kevyn Orr reject the idea of privatizing Detroit’s local water and sewer systems, as doing so will not provide a real, sustainable and responsible solution for the city’s financial shortfall. Policymakers should grant the public access to all information regarding potential privatization contracts, encourage public input and require a referendum on any proposed lease, concession or sale of a public drinking or wastewater system.

Borrowing Trouble: Water Privatization Is a False Solution for Municipal Budget Shortfalls is available here:

http://foodandwaterwatch.org/reports/borrowing-trouble-water-privatization-is-a-false-solution-for-municipal-budget-shortfalls/Food and Water Watch logo

Food & Water Watch works to ensure the food, water and fish we consume is safe, accessible and sustainable. So we can all enjoy and trust in what we eat and drink, we help people take charge of where their food comes from, keep clean, affordable, public tap water flowing freely to our homes, protect the environmental quality of oceans, force government to do its job protecting citizens, and educate about the importance of keeping shared resources under public control.

Tia Lebherz
Organizer
Food & Water Watch
2727 2nd Ave, Suite 136
Detroit, MI 48201

Office: 313.486.1356
Cell: 310.963.0789
Fax: 313.486.1357
tlebherz@fwwatch.org

http://www.foodandwaterwatch.org/

Related articles:

http://voiceofdetroit.net/2013/03/20/detroit-water-dept-on-the-table-says-efm-commissioners-approve-report-rooted-in-lies/

http://voiceofdetroit.net/2013/03/12/grand-theft-of-detroits-water-dept-imminent-water-board-mtg-wed-march-13-2pm/

http://voiceofdetroit.net/2012/09/27/detroit-dwsd-debt-shows-wall-street-never-loses-on-bad-swaps/

http://voiceofdetroit.net/2012/11/19/detroiters-outraged-over-top-council-members-complicity-in-ema-water-dept-takeover-hearings-tues-nov-20/

http://voiceofdetroit.net/2012/11/19/pro-tem-brown-in-bed-with-bowc-water-contractors/

http://voiceofdetroit.net/2012/10/21/epa-wants-45-day-halt-to-ema-detroit-water-contract-council-presses-ahead/

http://voiceofdetroit.net/2012/10/02/an-eye-witness-report-from-detroits-afscme-local-207-water-strike/’

 


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OCCUPY THE U.S. DEPT. OF EDUCATION APRIL 4-7 VS. SCHOOL CLOSINGS; DETROIT LEADERS TO SPEAK

Occupy DOE poster

 

 OCCUPY THE US DEPARTMENT OF EDUCATION 2.0

The Battle for Public Schools

From United Opt Out National

April 4, 2013

Helen Moore, leader of Keep the Vote No Takeover, at press conference against Detroit EM takeover, March 22, 2013

Helen Moore, leader of Keep the Vote No Takeover, at press conference against Detroit EM takeover, March 22, 2013

Folks can tune in to Detroit’s participation on Saturday April 6 (Helen Moore, leader of Keep the Vote No Takeover, will be speaking at 2 pm). March to the White House at 3 pm.

All four days for the entire event April 4-7  http://www.livestream.com/califather

All other info re: the event can be found here:
http://unitedoptout.com/occupy-doe-2-0-the-battle-for-public-schools-last-minute-details

Administrators of the public education advocacy group UNITED OPT OUT NATIONAL are hosting the second annual event on the grounds of the US Department of Education in Washington, DC on April 4-7, 2013. We ask all of those in support of teachers, students and public schools to attend. The third day will include an organized march to the White House.

Child at DOE protests standardized testing.

Child at DOE protests standardized testing.

The event is a four-day gathering of progressive education activists endeavoring to resist the destructive influences of corporate and for-profit education reforms, which began in previous administrations and persist with the current one. We cannot and will not stand silent as the threats to dismantle our system of public education continue. These threats include the erosion of the teaching profession, excessive use of standardized testing, mandated scripted curriculum, the absolute disregard of child poverty, and reforms which disproportionately impact minority communities.

CTU Pres. Karen Lewis and Chicago teachers have led a massive strike, and are in the forefront of current school closings protests there.

CTU Pres. Karen Lewis and Chicago teachers have led a massive strike, and are in the forefront of current school closings protests there.

We ask that you join us, stand tall, and meet your responsibility as citizens to be heard above the din corporate influence. You will have the opportunity to hear speakers and converse with public school advocates from across the country, including Diane Ravitch, Nancy Carlsson-Paige, Chicago Teachers Union President Karen Lewis, Stephen Krashen, Brian Jones, Deborah Meier, Helen Moore, and many other students, teachers, and community members (visit the link below for full schedule details1).

1 Occupy2.0 Full Schedule: http://unitedoptout.com/the-official-schedule-for-occupy-doe-2-0-the-battle-for-public-schools/

Do not miss this free and unique opportunity to connect with like-minded public school advocates. Come gather information and strategies that can be used to fight corporate education reform in your own community. Join us and make your voice heard.

If you require more information about the event, or to schedule interviews with the Administrators of United Opt Out National, please contact Peggy Robertson at (720)810-5593 or via email writepeg@juno.com.

Email: unitedoptoutnational@gmail.com Website: http://unitedoptout.com

Helen Moore (center) with Detroit Journey for Justice delegation on Capitol Hll Jan. 29, 2013.

Helen Moore (center) with Detroit Journey for Justice delegation on Capitol Hll Jan. 29, 2013.

VOD: The U.S. Department of Civil Rights just announced that it is opening an investigation into disproportionate closings of schools in communities of color in Michigan, as a result of the events below. Click on DOE letter to Helen Moore to read letter sent to Elder Helen Moore.

Video below is from National Journey for Justice event Sept. 12, 2013; a busload attended to protest destruction of Detroit Public Schools.

 

  Huff Post black-voices
 
 

School Closures Violate Civil Rights, Protestors Tell Arne Duncan

Posted: 01/29/2013 7:01 pm EST | Updated: 02/01/2013 2:12 pm EST

 
 

School Closures Civil Rights

 
 

WASHINGTON — The standards-based education reform movement calls school change “the civil rights issue of our time.” But about 220 mostly African American community organizers, parents and students from 21 cities from New York to Oakland, Calif., converged on Washington Tuesday to tell U.S. Secretary of Education Arne Duncan he’s getting it backwards on school closures.

Members of the group, a patchwork of community organizations called the Journey for Justice Movement, have filed several Title VI civil rights complaints with the Education Department Office of Civil Rights, claiming that school districts that shut schools are hurting minority students. While most school closures are decided locally, the Education Department’s School Improvement Grant gives underperforming school districts money for shakeups or turnarounds, including closures.

Chicago students march through the Loop protesting the city's plan to close more than 50 elementary schools on March 25, 2013 in Chicago, Illinois. Last week the city announced the plan claiming it was necessary to rein in a looming $1 billion budget deficit. The closings would shift about 30,000 students to new schools and leave more than 1,000 teachers with uncertain futures. (Photo by Scott Olson/Getty Images)

Chicago students march through the Loop protesting the city’s plan to close more than 50 elementary schools on March 25, 2013 in Chicago, Illinois. Last week the city announced the plan claiming it was necessary to rein in a looming $1 billion budget deficit. The closings would shift about 30,000 students to new schools and leave more than 1,000 teachers with uncertain futures. (Photo by Scott Olson/Getty Images)

The meeting became heated at times. “The voices of the people directly impacted can no longer be ignored,” said Jitu Brown, an organizer from the South Side of Chicago. “This type of mediocrity is only accepted because of the race of the students who are being served.” He called school closures “a violation of our human rights,” since many communities are left without neighborhood schools after districts shut them down.

“We are not Astroturf groups,” Brown continued. “We are not people who are paid by private interests to appear.”

Helen Moore, an organizer from Detroit, said the current reform movement is tantamount to racism. “We are now reverting back to slavery,” she said. “All the things that are happening are by design, by design, by design. They don’t want our children to have an education, but we’ll fight to the death.” Continue reading


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CLAYTOWN COMMUNITY MEMBERS SAY MUNGER GROUNDS STILL A DANGER TO STUDENTS, RESIDENTS

Claytown community activist Sheila Crowell (l) explains her concerns about contaminated grounds at new Munger PreK-8 school to community and officials, including (background) State Rep. Virgil Smith.

Claytown community activist Sheila Crowell (l) explains her concerns about contaminated grounds at new Munger PreK-8 school to community and officials, including (background) State Rep. Virgil Smith.

 Bond project manager claims sites are safe based on inspection by “3rd party” environmental hygienist

DPS admits no removal of contaminated soil was done before constructing Prop S schools

Community fears sites remain dangerous to children and families

By Diane Bukowski with Sheila Crowell 

April 1, 2013

DETROIT — The Chicago school district announced the closure of 54 schools last month, due to a $1 billion debt. The declaration brought back horrific memories of the Detroit Board of Education’s 2005 vote to close 50 schools, the beginning of a Hurricane Katrina that has left the district with only 104 bona fide (non-charter) public schools out of 268 it had in 1999. By 2014, additional closures will reduce that figure to 72. 

Chadsey High School before its demolition.

Chadsey High School before its demolition.

Sheila Crowell, a community activist, has doggedly followed the demise of Chadsey High School, a storied multi-ethnic landmark, and other schools serving Detroit’s “Claytown” neighborhood on the city’s near west side over the last decade. Southwestern High School,  and Hanneman, O.W. Holmes, Logan and Munger Elementary Schools,  among others, have also been closed. 

Recently, Crowell and her neighbors have focused on environmental and health issues resulting from Chadsey’s demolition, and its replacement by the $22.3 million Munger PreK-8 elementary on what was confirmed to be contaminated soil prior to the construction.

Chadsey during demolition, which left site contaminated with dangerous chemicals including asbestos and lead.

Chadsey during demolition, which left site contaminated with dangerous chemicals including asbestos and lead.

 The construction managers were Turner Construction, a national white-owned company headquartered in New York City, and White Construction, a Black-owned Detroit-based business. Walbridge Aldinger, owned by John Rakolta, a close ally of Michigan Gov. Rick Snyder, Brailsford Dunleavy, and Fanning Howey form the overall Bond Program Management Team.

“Carol Weaver [DPS supervisor of community outreach] and the DPS feel the school grounds are safe,” Crowell said. “No one is bucking the DPS, because no one cares about the youth and our 48210 Claytown neighborhood residents, meaning our lives are in danger every day. When the rain comes this spring the so called safe DPS school and park grounds will melt away again, running down onto the school grounds, city of Detroit sidewalks, streets, and alleys, placing the homeowners’ lives and homes in major danger. Does someone have to wait until the ground sinks leaving open holes for a youth or adult to fall into to? All of this and more just so people like Walbridge could make money off the Proposal S Plan.” 

Munger High School, front, during meeting March 1, 2013. Walkways into school were also covered with ice and unsafe.

Munger High School, front, during meeting March 1, 2013. Walkways into school were also covered with ice and unsafe.

The demolition and construction were paid for out of a $500.5 million bond issue allegedly approved by Detroit voters as Proposal S in 2010.  (The Wayne County Board of Commissioners ruled that 60 percent of the votes in the election, including all absentee ballots, were not recountable due to irregularities, in response to a challenge by Mayoral candidate Tom Barrow.)

DPS officials at a March 1 meeting called by Crowell and held in the Munger school library admitted no removal of contaminated soil was done prior to the school’s construction, but claimed precautions taken have made the grounds safe.  

MDEQ representatives stand in background during meeting at Munger.

MDEQ representatives stand in background during meeting at Munger.

They reiterated what Rachel Lynn of  Brailsford and Dunlavey told Crowell in an email March 29, 2012:

“The soils on school site only (not Dingeman Park) were tested before the start of construction by a 3rd party environmental hygienist, and the test results showed that the contaminants in the soils were those found in diesel fuel and metals;

Rachel Lynn of Brailsford and Dunleavy, part of DPS Bond Program Management Team.

Rachel Lynn of Brailsford and Dunleavy, part of DPS Bond Program Management Team.

The Michigan Department of Environmental Quality (MDEQ) evaluates the risk associated with contaminants by examining the different ways people may be exposed to them, including eating, touching, inhaling dust, breathing vapors, etc.

For the contaminants found in the soils at Munger, and at the levels they were detected, the only way of exposure that posed risk was if the soils were touched or eaten; for all other ways (inhaling, drinking water, breathing vapors, etc.), the contaminants were not present at levels above the acceptable standards set by MDEQ for residential areas;

The imported soil and sand will be tested by the 3rd party hygienist to confirm that it is free of contaminants and do not pose risk to the students or community;

All soils currently seen piled on site will remain on site and will not be removed and dumped;

This method of managing the soils is a method approved by MDEQ and has been used at schools in Detroit and the suburbs; and

The site will be safe for the students and community as a result of these measures.”

Sheila Crowell makes a point during March 1 meeting.at Munger.

Sheila Crowell makes a point during March 1 meeting.at Munger.

Crowell responded, “If the MDEQ has not or cannot receive copies of all testing done by this third party environmental hygienist who so called tested the Munger School grounds at any level, how would MDEQ be able to say and give the okay the contaminated soil was safe for anyone walking to school, attending school, playing and rolling on school grounds, residents, homeowners, anyone who would put themselves in, on or near the DPS school property, including Dingeman Playfield, both owned by the DPS? The Munger School grounds, Dingeman Playfield, Larkins Alley, homeowners/property on Larkins, Cecil and Martin, etc. must be tested and paid for by DPS. Just because we are a poor neighborhood, we have rights to live & breathe as any other human person living in the USA.”

Shreds of what appears to be orange geofabric on Munger site in July, 2012. Photo by Sheila Crowell.

Shreds of what appears to be orange geofabric on Munger site in July, 2012. Photo by Sheila Crowell.

Crowell proceeded to monitor the site herself repeatedly during and after construction. During one visit to the site in July, 2012, she observed that some of the “geofabric”  barriers were already shredded, among numerous other problems.

In Aug. 2012, VOD went to the site with Crowell and took photos, observing large mounds of soil, standing pools of water, debris including a dog carcass, more orange geofabric that was out of place, and other items which appeared to be evidence of contamination.. VOD published an article by Crowell including those photos along with hers, and VOD commentary, at

http://voiceofdetroit.net/2012/09/02/new-munger-school-contaminated-soil-standing-water-west-nile-virus/

Sheila Crowell and neigbhor point out iced over walkway on Munger grounds that they fear will melt in the spring and contaminate new soil laid over old.

Sheila Crowell and State Sen. Virgil Smith point out iced over walkway on Munger grounds that they fear will melt in the spring and contaminate new soil laid over old.

Crowell said that since then, she has repeatedly asked the Michigan Department of Environmental Quality to test both the Munger site and Dingeman Playfield, to no avail. During the March 1, 2013 meeting, former Chadsey and current Southwestern High School coach Ron Hardy asked, “Are the geo-fabric barriers waterproof?” 

The MDEQ reps contended that “water infiltration is not necessarily a concern. The possibility of water becoming contaminated is minimal. There is no acute risk.” 

DPS Bond Cttee_0002“Why did the Bond Oversight Committee stand by the decision to lay geo-fabric barriers in landscaped areas, not covered by pavement on top of the contaminated soil, then import 12 inches of new sand and top soil to lay on top of the barrier?” Crowell asked. “That’s 12 inches of so called protection which is washing away. A foot of protection. Shame!”

The meeting and walk-though of the Munger grounds, called by Crowell for the community and government officials March 1, 2013, was well-attended. 

Michigan State Rep. Rashida Tlaib (D-Detroit), State Sen. Virgil Smith (D-Detroit), and Jesse Gonzalez, representing Wayne County Commissioner Ilona Varga were present, along with two MDEQ representatives, Joseph DeGrazia, C.P.G. and Gerald Tiernan, C.P.G. 

Community representatives included Claytown residents Al Nasir and Aswan Almaktary of ACCESS, John Lopes, President of Southwest PRIDE, and Coach Hardy. 

Representing DPS in addition to Weaver were Roderick Brown, Executive Director of Operations for the bond program, Kevin Smith, Chief of Staff to DPS EM Roy Roberts,  Felicia Venable-Akinbode, executive director of DPS Auxiliary Services, and Munger School Principal Deborah Hurst.

State Rep. Rashida Tlaib explains her bill that would require remediation of grounds before new school construction,.

State Rep. Rashida Tlaib explains her bill that would require remediation of grounds before new school construction,.

The most striking admission from DPS at the meeting was that nothing was done at Munger or other newly-constructed Prop S schools to actually remove contaminated soil. Many of the schools have been built on sites where old schools laden with asbestos and other contaminates were demolished.

“I have introduced House Bill 4827, which would require an environmental assessment before schools are constructed,” Rep. Tlaib said. (Click on Tlaib 2013-HIB-4278 to read entire bill.)

The bill says public notice of the results of the inspection shall be posted on the school board’s website and published in a newspaper of general circulation.

Standing water turned into ice still on Munger grounds March, 2013.

Standing water turned into ice still on Munger grounds March, 2013.

It further states, “The board or board of directors shall not commence construction of a school building at the site unless a licensed professional engineer has attested under seal that planned reponse activities will at least satisfy the clean-up criteria for limited residential use under Sec. 20120A(1)C and (17) of the Natural Resources and Environmental Protection Act, 1994 PA 451, MCL 324.20120A, or planned corrective action will at least satisfy the cleanup criteria for restricted residential use under part 213 of the Natural Resources and Envionmental Protection Act, 1994 PA 451,  MCL 324.21301A TO 324.21334.”

Ice was on Munger basketball court as well. Sheila Crowell and VOD saw children playing there last fall.

Ice was on Munger basketball court as well. Sheila Crowell and VOD saw children playing there last fall.

Rep. Tlaib said, “I would rather that the school sites just get completely remediated before the buildings are constructed.” She expressed concerns that DPS would be subject to lawsuits from the community as illnesses related to the contamination develop.

Crowell said she is also concerned about Dingeman Playfield adjacent to the new Munger PreK-8 building. DPS purchased those grounds from the City of Detroit, possibly through Prop S, and is now responsible for them.

“I am very concerned about health issues there for the kids and the parents,” Crowell said. “I want those grounds tested as well.”

Ice pool where trees were planted on Munger grounds by Greening of Detroit.

Ice pool where trees were planted on Munger grounds by Greening of Detroit.

Conditions on the Munger and Dingeman sites became apparent as the group did a walk-through of the area. But even prior to the walk-through, VOD noted that the sidewalks in front of Munger were covered with  ice and barely accessible for the young children entering and leaving the building,  let alone adults.

During the walk-through, large iced over areas on the grounds were evident, in the same areas VOD observed pools of standing water during its walk-through in Sept. 2012. Also iced over were walkways and a basketball court used by students and the community. Crowell and others expressed concern that when the ice melts, the resulting water will sink into the new soil placed above the contaminated soil and carry contaminants back to the top.

Sheila Crowell and community group planting tree on Dingeman Playfield several years ago. Their community plan for the playground was destroyed by bureacrats; they lost over $508,000 in funding.

Sheila Crowell and community group planting tree on Dingeman Playfield several years ago. Their community plan for the playground was destroyed by bureacrats; they lost over $508,000 in funding.

Crowell pointed out saplings that the Greening of Detroit had planted on the grounds and expressed doubts  regarding whether they would be contaminated as well, and fail to grow properly. A retired  City of Detroit Recreation Department forester told VOD earlier that the Greening of Detroit does not follow up properly on trees it plants because its young volunteers do not have the needed training.

As we walked through Munger School, images of what had been a vibrant, multi-ethnic, renowned Chadsey High School came to mind, a school destroyed by government officials and contractors greedy for dollars. Chadsey students walked out several times to protest their school’s closing, to no avail. See the video below taken in 2007 by a Chadsey student.

death by reflectionChadsey High School 2007, uploaded by “death by reflection.” Some clips & pics from Chadsey high school my tenth grade year before I got expelled. Just watch, you might even be in it!! This is a video of a last view of how this school will be remembered! It will be demolished, starting March 8th, 2011. Long live ” The Explorers!”  Comments:

Rachel Hutterson damn!!!MEMORIES MEMORIES; MzSweets1010 man this is just sad…so many memories here and now they’re all gone.. and i thought i could return in a few years and look back on the good times..smh CLASS OF 09!!!

Related articles:

http://voiceofdetroit.net/2012/09/02/new-munger-school-contaminated-soil-standing-water-west-nile-virus/

NEW MUNGER ELEMENTARY SCHOOL WILL NOT SERVE COMMUNITY NEEDS SC

 


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BETTER EXILED THAN CAPTIVE IN THE PROMISED LAND

Protesters including DPS board member Tawanna Simpson (r) carried out eviction of EFM Roy Roberts Nov. 12, 2012. Now he in turn has evicted the school board (again) under PA 436.

Protesters including DPS board member Tawanna Simpson (r) carried out eviction of EFM Roy Roberts Nov. 12, 2012. Now he in turn has evicted the school board (again) under PA 436.

By Elena Herrada (Notes)

Monday, April 1, 2013 at 10:31pm

Elena Herrada speaks at forum against EAA Aug. 2, 2012

Detroit school board member Elena Herrada speaks at forum against EAA Aug. 2, 2012

The elected Detroit School Board members face a new Emergency Manager law, PA 436, which replaces the one the voters repealed. Despite the fact that the language of the ballot initiative stated that repeal of PA 4 would also repeal its predecessor law, and that once the signatures were certified, the emergency manager law would be immediately suspended, none of this came to pass.

Despite the fact that Detroiters pay for a bond iniatiative to build much needed new schools, when the State took over, it sold off or leased our new buildings to charters and to the separate and unequal new experiment, The Educational Achievement Authority.

The Emergency Manager can hold all power over elected officials. This is the greatest perversion of democratic representation; one who is not elected answers to no one, and those of us elected answer to a corporate proxy. Crucial decisions about education are made by share holders and bond holders who know or care nothing of education for poor Black and Brown children. This is economic organ harvesting with full complicity of the state, the philanthropic community and the banks.

Protest against DPS state-appointed CEO Kenneth Burnley June 16, 2005. Student Sasha Alford at front.

Protest against DPS state-appointed CEO Kenneth Burnley June 16, 2005. Student Sasha Alford at front.

We are also being told that the options for voting out the emergency managers is actually a White Only option. None of the municipalities or school districts currently under EM will be eligible for the same option to vote out an EM. This “Grandfather” clause is similar to the Jim Crow laws that exempted Black people from equal protection under the law. This is being challenged; a law suit was filed in Federal Court last week on March 28th in Detroit.

The brutal racism leveled against Detroit- especially Detroit’s most vulnerable children- is something we have not witnessed in our lifetime- those of us under 70 or 80 years old. We have not witnessed state imposed racial and economic segregation; indeed, we were witnesses to court ordered school desegregation, which caused rapid white flight in the 70s, making way for Coleman A. Young to be the longest serving mayor in Detroit history. But it is no longer necessary to vote to run Detroit; indeed, voters run nothing. Detroiters who fought long and hard for representation- and for Latinos, a dream deferred- are watching our voting rights erode before our eyes while newcomers are being given tax abatements and incentives to move into the city.

Emiliano Zapata

Emiliano Zapata

The fact that the next election would have been the first in Detroit to offer the possibility of Latino representation via district voting vs. at large is only a small part of the current political moment. A city of 85% African Americans and all Black cities in Michigan have been stripped of voting rights by the state and we are still too numb to coherently make a plan to resist. Anyone elected to office now would have no power to make decisions. It calls into question why anyone would run. (School Board members do not get paid).

The elected school board members proudly return to exile. We invite the Detroit city council members to join us in exile and say NO to captivity; say NO to complicity; say NO to collaboration with those who steal our resources, our future and our city. SAY NO and JOIN THE DPS BOARD in EXILE!

In the words of Emilano Zapata, ” It is better to die on one’s feet than to live on one’s knees.”


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JUDGE APPROVES STOCKTON, CA BANKRUPTCY; NOW ITS BONDHOLDERS V. RETIREES

 

Children ride their bikes past a City of Stockton recreational building.

Children ride their bikes past a City of Stockton recreational building.

Court says city of Stockton, California may proceed with bankruptcy

  • Creditors including Wells Fargo, BOA, Union Bank NA, IBM, Key Government Finance, Ambac, others object;  judge rebukes them
  • Retirees still  in danger if federal law trumps state law guaranteeing pensions
  • Detroit advocates of bankruptcy–beware

(VOD editor: As of April 14, 2013, VOD has corrected the original version of this post as follows:  A representative of The Bank of Stockton  contacted VOD earlir about the caption to the photo previously used at the top of the story, which showed a downtown building in Stockton displaying an ad for the Bank of Stockton. She indicated that the sub-title used for the photo when clicking on it appeared to indicate the Bank of Stockton itself was bankrupt, and she mis-stated the actual headline of the story, which remains as above. VOD responded that it would change the sub-title of the photo to clarify that it was not the Bank of Stockton that declared bankruptcy. Later, VOD received the following rather strongly, perhaps maliciously, worded email from the Bank’s attorney:

Rather than take the responsible action that I demanded, below, you reconfigured your story slightly to attempt to diminish the libelous nature and in so doing added a line, below a photograph of the advertisement for the Bank appearing on a downtown Stockton building, which now reads: “The Bank of Stockton is one of the city’s creditors.” And then you further called out the Bank by name in a list of creditors appearing below the referenced photograph. Your apparent source for the assertion that the Bank is a creditor of the City of Stockton is a document that is linked to your article. Your article references a linked document that you assert is “a creditors’ list from federal court records.” At the time I wrote my April 3 email, I gave you the benefit of the doubt that you had done adequate research to confirm the document was what you said it was and that the Bank was actually a creditor. We have since confirmed that neither is the case. The document is not an official creditors’ list as you claim, but likely is only a list of interested parties obtaining notice of the bankruptcy proceedings. In addition, the Bank is categorically not a creditor of the City. As a result, your article is false on two counts and both false claims adversely affect the Bank, particularly your falsely lumping the Bank in with the list of “capital market creditors [who] had failed to negotiate in good faith in a pre-bankruptcy mediation, as required by law, and [who were] also criticized [for] their refusal to pay part of the bill for mediation.” As a result of my April 3 demand and the exchange with Ms. Brusa, you apparently sought to temper the libelous nature of your original article by making the above-referenced modifications. The problem for your publication, however, is that in doing so you actually doubled down on the falsity of the assertions made against the Bank—assertions that—had you performed customary and appropriate research—should never have been made. You and your publication were therefore either reckless in republishing the story or are now republishing the story maliciously because the Bank pointed out the problems with your original story. Either scenario creates substantial liability for you and your publication. The Bank renews its demands for a complete retraction of the story, a cessation of use of the Bank’s advertisement in connection with the City of Stockton bankruptcy and an apology for the false assertions leveled against the Bank. You have two business days to do so. In all other respects, the Bank renews the demands and admonitions in my April 3 email. Please confirm by return email to me as soon as the required actions have been taken. Again, the Bank reserves all legal and equitable remedies to address this situation should you elect not to comply 

Greg L. Johnson

Lewis Brisbois Bisgaard & Smith, LLP

VOD replied as follows when we finally got to the email among the hundreds we get every day, on April 14, 2013:

Well, you gave me two business days. I just got to this email today so I guess you’ve done whatever you plan to do. I should point out that this is a wire story from Reuters. Therefore I will not take the story down. Your problem appears to be with the photo and the inclusion of the Bank of Stockton as a creditor. You should be aware that the official U.S. PACER site advises users under bankruptcy courts to use the mailing matrix list instead of “creditors” because it says the creditor list may not be complete. https://ecf.caeb.uscourts.gov/cgi-bin/CreditorQry.pl?495514. Therefore, if I was in error stating that the Bank of Stockton is a creditor, I will publish a correction to the story indicating that the Bank of Stockton says it is not a creditor, and that this inclusion in the original story may have been due to a misreading of the federal PACER site. Plus I will remove the link to the mailing matrix list provided by PACER, since it DOES include the Bank of Stockton. To further allay your concerns, I will replace the photo (which is not mine but from another website) with a different photo with no reference to the Bank of Stockton. I apologize for any problem this may have caused the Bank of Stockton.

I completely take issue with the tone of your reply; there was absolutely no malice intended on the part of my publication. The Bank you represent should be more concerned about what it can do to help out the city of Stockton at this point. Let me know if you have any further problems.)

Mon, Apr 1 2013

By Jonathan Weber

SACRAMENTO, California (Reuters) – A federal judge on Monday approved the city of Stockton’s petition for bankruptcy in a case that sets the stage for a lengthy battle between bondholders and the California pension system.

U.S. NINTH DISTRICT BANKRUPTCY JUDGE CHRISTOPHER KLEIN

U.S. NINTH DISTRICT BANKRUPTCY JUDGE CHRISTOPHER KLEIN

In a case being studied by other cash-strapped American cities including Detroit, U.S. Bankruptcy Court Judge Christopher Klein’s decision was a setback for bondholders and insurers who had resisted the California city’s bankruptcy filing. Stockton is the largest U.S. city ever to file for bankruptcy.

The judge also signaled that the California Public Employees Retirement System’s [Calpers] position in the case was not above review. Stockton, a city of 300,000, has so far not reduced pension payments to retired city workers, although it has eliminated retiree healthcare benefits.

“This does not mean there is not potentially a serious issue involving Calpers,” Judge Klein said. “But at this point I do not know what that is.” He added that there were “very complex and difficult questions of law that I can see out there on the horizon,” relating to Calpers.

Stockton, CA city worker leaves city hall in Feb. 2013.

Stockton, CA city worker leaves city hall in Feb. 2013.

The decision on Stockton marks the start of a lengthy restructuring of the obligations that currently overwhelm its finances, which were crippled by the housing crisis and recession.

Investors in the $3.7 trillion municipal bond market are concerned that if Stockton is able to avoid paying bondholders in full without cutting pension payments, other cities will pursue a similar strategy as they struggle to cope with budget shortfalls.

Kenneth Naehu, head of fixed income at Bel Air Investment Advisors in Los Angeles, agreed that the case could cloud the issue of where bondholders stand in relation to retirees and pension funds in a municipal bankruptcy.

STATEMENT OF STOCKTON, CA DEBT FROM 2011 CAFR

STATEMENT OF STOCKTON, CA DEBT FROM 2011 CAFR

CALPERS ISSUE LOOMS; JUDGE REBUKES CREDITORS

In a lengthy preamble to his ruling, Klein delivered a stinging rebuke to the so-called capital market creditors – mainly the insurers for bondholders who own hundreds of millions of dollars of Stockton debt – who had opposed the bankruptcy filing.

He rejected the arguments of bondholders and insurers that Stockton was not truly insolvent when it sought Chapter 9 bankruptcy protection last summer and that it had improperly failed to seek relief from its pension obligations.

Stockton creditors

Klein said capital market creditors had failed to negotiate in good faith in a pre-bankruptcy mediation, as required by law, and also criticized their refusal to pay part of the bill for mediation.

Calpers is far from off the hook, but the city’s obligations to the retirement system are properly addressed as part of the effort to finalize a “plan of adjustment” for emerging from bankruptcy, the judge said.

Child defends Detroit retirees during Sept. 30, 2012 Wastewater Treatment Plant strike.

Child defends Detroit retirees during Sept. 30, 2012 Wastewater Treatment Plant strike.

Michael Sweet, a municipal bankruptcy lawyer with Fox Rothschild who is not involved in the case, said the judge’s remarks suggested that “somewhere along the line the city will have to go to Calpers, because otherwise they will have problems with discrimination in the plan.”

A plan of adjustment, like any bankruptcy reorganization plan, cannot favor one group of creditors over another.

“You’re going to see an issue teed up that could go to the U.S. Supreme Court,” Sweet said.

Calpers asserts that California law protects pensioners from any haircut even in bankruptcy, but that position has never been tested in court.

‘SCORCHED EARTH’ TACTICS

Bob Deis, the Stockton city manager who is largely responsible for managing the bankruptcy process, called the judge’s verdict a “vindication” of the city’s position.

Artist Mark Bradford with his mural, "Scorched Earth."

Artist Mark Bradford with his mural, “Scorched Earth.”

He criticized the “scorched-earth” legal strategy of the bond creditors as a waste of time and money, and said the city had already spent $6 million to $7 million on the mediation and legal costs.

Assured Guaranty Ltd, one of the bond insurers, said in a statement that it “disagrees” with the judge’s ruling but that it looked forward to working with the city on a “consensual approach” to resolving its debts. A company spokesman also said that it had tried to negotiate with the city prior to bankruptcy, but without success.

Others opposing the city’s bankruptcy included National Public Finance Guarantee Corp, Wells Fargo Bank, the Franklin California High Yield Municipal Fund and Franklin High Yield Tax-Free Income Fund.

Municipal bankruptcy court

Municipal bankruptcy court

Throughout his two hours of comments, the judge made it clear that he thought the city had done everything it could to avoid bankruptcy. He noted that sharp cost-cutting had begun years ago, and that 77 percent of the city’s budget was devoted to already-diminished police and fire services.

Klein agreed that further cuts in public safety and other services were not options.

It was not clear on Monday if any of the capital market creditors would appeal the ruling. A spokesman for Assured Guaranty said the company wanted to see the written ruling before it determined next steps. National Public Finance Guarantee had no comment on a possible appeal.

(Reporting by Jonathan Weber; Additional reporting by Michael Connor in Miami; Editing by Chris Reese, Tiziana Barghini and Will Dunham)

Stockton, California eligible for municipal bankruptcy protection: judge

Related story on Assured Guaranty: http://www.capoliticalreview.com/top-stories/bond-insurer-may-contest-stockton-bankruptcy/


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DETROIT PENSION SYSTEMS UNDER ATTACK; ACTUARY DISPUTES MILLIMAN REPORT

 

In 2010, French workers carried out a general strike and protests in the millions across the country to stop changes to their pension systems, which allowed workers to retire at 60. The government wanted to change the age to 62. They were victorious. Photo shows protest in Lyon.
In 2010, French workers carried out a general strike and protests in the millions across the country to stop changes to their pension systems, which allowed workers to retire at 60. The government wanted to change the age to 62. The workers were victorious. Photo shows protest in Lyon.

 (VOD: The Detroit City Council, under orders from its bosses anointed by the consent agreement, approved a contract with Milliman, Inc. to review the city’s pension fund systems, with the eventual objective of a takeover. Recent federal indictments of pension fund attorneys are linked to this objective. Detroit EM Kevyn Orr will have the power to appoint new officials to achieve the pension takeover.)

More on this is coming, but meanwhile,  following is a statement from the Detroit pension systems’ actuary. For comments from pension officials which state the funds are on solid grounds, including 102 percent funding of Detroit Police and Fire, and 83 percent funding of the General system, click on http://www.detroitnews.com/article/20130321/METRO/303210470. A GRS report on the pensions’ status as of June 30, 2012 is due for release soon.)

GRS Views on Recent City of Detroit Studies  

February 27, 2013 www.gabrielroeder.com  

In Detroit in 2010, city workers including police and fire held large protest against Bing's attempt to take over their pensions systems.

In Detroit in 2010, city workers including police and fire held large protest against Bing’s attempt to take over their pensions systems.

Gabriel, Roeder, Smith & Company (GRS) is the retained actuary for both the General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit. GRS is a Michigan based company with a national practice, and is a leader in Public Sector Retirement Consulting. Milliman, Inc., a Seattle based consulting firm, was called in recently to perform certain actuarial analyses of the City of Detroit’s Retirement Systems for the review team under the financial stability agreement.

GRS performs an actuarial valuation of both Systems each year. The actuarial valuations develop the liabilities and funded ratios of the plans as of the valuation date. They also develop the City’s contribution rates for the fiscal year that starts one year after the valuation date, based on established funding policies. In addition, our reports typically present information that allows the reader to understand the extent to which contribution rates may be expected to increase (or decrease) in the future and may provide recommendations on the operation of the System.

City workers protest pension cuts July 26, 2012.

City workers protest pension cuts July 26, 2012.

An article in the February 26, 2013 Detroit Free Press “Police, fire pension costs could crush Detroit’s finances, study shows” asserts that Milliman has “audited” our 2010 valuation reports and found that “the GRS numbers … don’t hold water.” We do not have access to the alleged audit by Milliman and thus can neither confirm nor deny that the Milliman report contains that statement. However, we can confirm the following:

The GRS numbers do hold water.

• GRS has not provided any information to Milliman in conjunction with an audit of the 2010 valuations.

• A traditional audit of an actuary’s work almost always involves an exchange of information between the retained actuary and the auditing actuary.

Conditions are changing rapidly at the City. Any review or audit of work done in the past must take into account differences between current conditions and conditions in effect when the original work was performed. 

AFSCME protest at CAYMC.

AFSCME protest at CAYMC.

The article goes on to state that contributions to the two Retirement Systems could rise to very high levels over the next several years, when expressed as a percentage of payroll. That is no surprise, given the shrinking covered payroll and the relatively large number of retirees. Contrary to the implications in the article, there is no inconsistency between the 2010 funded ratios calculated by GRS and potentially high future contribution requirements estimated by Milliman.

Gabriel Roeder Smith & Company stands by its work for the City of Detroit Retirement Systems. Our reports are accurate, complete, and provide policy makers with the tools they need to make informed decisions.

We are continuing to work with both Retirement Systems to provide meaningful long term solutions that all stakeholders can embrace.


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