Detroit ― The Police and Fire Retirement System of Detroit filed an appeal on Monday, pushing back on a federal bankruptcy judge’s ruling in favor of Mayor Mike Duggan administration’s plan to extend the city’s pension payment obligations over 30 years rather than 20 years.
The city’s police and fire retirees are continuing litigation that has been ongoing since August 2022, when the city administration initially filed suit against the pension system to enforce a 30-year pay-out schedule.
On June 26, Bankruptcy Court Judge Thomas Tucker ruled in the city’s favor, stating a 30-year amortization period is “indeed part of the (bankruptcy) Plan of Adjustment and that the Police Fire Retirement System cannot change it.”
PFRS filed a 56-page appeal seeking a fresh set of judicial eyes to reverse Tucker’s amortization opinion. The federal court is “being asked to review the case without the previous baggage and politics associated with the bankruptcy case,” said PFRS Spokesman Bruce Babiarz.
The PFRS argues for the imposition of a 6.75% rate of return that was specifically set to expire after 10 years under the Plan of Adjustment, the bankruptcy exit plan. After June 30, the pension fund’s rate of return and its amortization funding policy are within the purview of the Police and Fire Retirement System’s Board of Trustees and Investment Committee, according to the pensioners’ filing.
“The PFRS Board voted for the 20-year amortization and they should have the ability to set their own payment schedule,” Babiarz said.
At the 30-year determined rate, the city will complete its debt obligations in 2054. Police and fire retirees want their pension fund to be made whole sooner.
The city of Detroit would have paid $12 million more a year under the police and fire retirees’ preferred 20-year amortization period, an amount the Duggan administration said was too expensive. The administration’s plan to stretch out its payments results in a smaller hit to the city’s coffers initially and allows it to pay off pension debts “sustainably over 30 years,” according to the Duggan administration’s previous court filing.
The payment plan is part of a city bankruptcy settlement dating from 2014 that allowed Detroit to delay retiree pension fund payments until this past July.
“While the Bankruptcy Court should have denied the City’s Motion outright… Such requested relief (to the city) is procedurally inappropriate pursuant to the Federal Rules of Bankruptcy Procedure,” pensioners argue. “In its Amortization Opinion, the Bankruptcy Court quoted the same controlling language that the Michigan court interpreted as meaning that the Board controls the amortization decision and found that this language means nothing of the sort.”
The pensioner’s appeal argues, “The Bankruptcy Court failed to even mention the Michigan state court case cited by the PFRS found the exact opposite. This was an error that if corrected, compels a reversal of the Amortization Opinion.”
PFRS is seeking to get as much funding as early as possible from the City.
The city has paid $40 million into the Retiree Trust Fund, established by the City Council separate from the PFRS pension system, over the last year and $170 million two years ago.
Duggan said during his $2.7 billion budget proposal to the City Council on Thursday that he wants to give out a one-time bonus check to retirees, but doesn’t promise to make it permanent. Some retirees have complained it is expensive to get health care and they often have to find jobs to make ends meet in the wake of bankruptcy deal benefit cuts.
“We have the ability to put $10 million into a (13th check) and $10 million to enhance the current active employees,” Duggan said. “If we get into some open-ended obligations (cost of living increase), the first thing you’re going to see our credit rating decrease, and we don’t want to make a promise we can’t keep.”
Bsabiarz said they were pleased with the city’s contribution to the Retiree Protection Fund and “the system needs as much help as it can get as it has been largely underfunded.”
“The pension fund pays out approximately $30 million a month and during bankruptcy, it was a $2.8 million fund, Even a decade later, it’s still a $2.8 billion fund so we are proud of the investment,” Babiarz said.
The city does not comment on pending litigation.
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