The future of Detroit's pensioners at stake

Updated: Saturday, August 3, 2013
The future of Detroit
KALAMAZOO, Mich. (NEWSCHANNEL 3) - It's a question financially troubled cities all over the U.S. are going to be paying close attention to, as Detroit tries to figure out who gets what in the wake of its declaration of bankruptcy two weeks ago.

What happens to the city's pensioners--those 23,000 people, with more to come--who rely on their monthly checks for survival?

Tom Van Howe has more in tonight's edition of Tom's Corner.

=====================

When we on this side of the state think about Detroit, it's all too easy to remember the excesses and the decades of perceived political obstinacy flaunted by its leaders.

From individual limousines for school board members to the costly criminal behavior of former Mayor Kwame Kilpatrick.

We tend to think, 'Well, you guys created the mess you're in; you let it happen. You fix it.'

And by virtue of the deafening silence from Lansing and Washington on the issue of bailouts, we aren't alone.

But none of the 23,000 former city workers who rely on pensions now, nor any of the 9,000 or more who will be retiring someday with pensions as a key ingredient to their plans for a secure retirement had anything to do with the mismanagement that resulted in where things stand today.

They were police officers, firemen, linesmen, secretaries and so on. They worked for the city and as part of the package was the promise of retirement income. And its not as though the payouts are exorbitant. Police and fire: $30,000 a year.

Other city employees: about $19,000. Not enough to live a life of leisure with exotic vacations three times a year. But, its enough to help them live their lives with dignity.

And more than anything else—it was promised to them.

So now the city of Detroit may try to take that promise back.

The city owes a mind-bending $20 billion. It's trying to find ways to settle those debts for pennies to the dollar, but it would be an ethical blunder to do the same to pension recipients.

Detroit's Emergency Manager, Kevyn Orr, says the long-term pension liability is about $3.5 billion. And according to news reports, the city was a hundred million dollars short on its contribution to the pension fund.

Last year alone. Again—that's not the fault of the pensioners.

Attorney General Bill Schuette has jumped into the fray pledging to  defend the pensioners' constitutional right, under state law, to receive what they have coming. If Schuette is successful in making that argument stick, he'll become a hero to lot of people who have, perhaps, never heard of him.

But whether it remains merely a moral obligation, or an ironclad legal one; it's crystal clear the city of Detroit doesn't have the money.

And that means its going to fall to us—to you and me—the State of Michigan, to help make good on a multi-billion dollar promise the city of Detroit, on its own, cannot keep.

Why? Because, at the bottom line, we're all in this together, and  it is the right thing to do.

In this corner...I'm Tom Van Howe.

Business News

Last Update on July 27, 2015 17:07 GMT

DURABLE GOODS

WASHINGTON (AP) -- Orders to U.S. factories for big-ticket manufactured goods posted a sizable gain in June, reflecting a surge in demand for commercial aircraft. Meanwhile, a key category that reflects business investment rebounded after two months of declines.

The Commerce Department says orders for durable goods jumped 3.4 percent in June from May, when orders had fallen 2.1 percent. The gain was the best result since March.

A category viewed as a proxy for business investment plans increased 0.9 percent, then best showing since a 1.6 percent rise in March. This category had declined in April and May and has been weak for a number of months.

U.S. manufacturers have struggled this year from the effects of a strong dollar and a big plunge in energy prices.

FAST-FOOD WAGES

NEW YORK (AP) -- New York's Wage Board has finalized its recommendation to endorse a $15 minimum wage for fast-food workers in chain restaurants.

The formal step by the three-member board is necessary before Gov. Andrew Cuomo's labor commissioner can approve the increase. The commissioner, who also could make modifications, will have 45 days to act on the recommendation once he receives it.

Cuomo, a Democrat, supports the proposal, so it's unlikely that Acting State Labor Commissioner Mario J. Musolino will make many big changes.

The wage increase would apply to fast-food workers in restaurants with 30 or more locations. It would be phased in over three years in New York City and six years elsewhere. The first phase of the increase would take effect on Dec. 31, when the minimum wage for affected workers would go from $8.75 to $10.50 in New York City and to $9.75 in other areas.

Franchise owners say the increase unfairly singles out their industry and will force them to raise menu prices, cut employee hours or even replace workers with automation.

MCGRAW HILL FINANCIAL-ACQUISITION

NEW YORK (AP) -- McGraw Hill Financial, owner of ratings agency Standard & Poor's, is buying SNL Financial for about $2.23 billion.

Privately held SNL Financial, based in Charlottesville, Virginia, is a provider of financial news, data and analysis.

McGraw Hill Financial President and CEO Douglas Peterson says in a written statement that the transaction will enhance existing offerings, help in developing new services and allow the company to expand into adjacent markets.

McGraw Hill Financial Inc., based in New York, says it expects approximately $70 million in savings to be realized by 2019.

The deal is targeted to close in the third quarter.

RESTAURANT BRANDS-EARNINGS

NEW YORK (AP) -- Burger King has gotten a boost from the return of its "Chicken Fries."

Parent company Restaurant Brands International Inc. says sales rose 7.9 percent at Burger King locations in the U.S. and Canada during the second quarter. After taking Chicken Fries off the menu in 2012, Burger King had said last year it was bringing back the long, deep-fried piece of chicken as a limited-time offer in response to customer demands.

The campaign was so successful the company brought them back this year.

Restaurant Brands CEO Daniel Schwartz says Chicken Fries are also profitable because they have a high gross margin and restaurants sell a lot of them. They are positioned as a snack or meal and cost around $3.

OFFSHORE WIND

PROVIDENCE, R.I. (AP) -- Construction has begun off Rhode Island's coast on the nation's first offshore wind farm.

Deepwater Wind is building a five-turbine wind farm off Block Island. It hopes to power 17,000 homes as early as next year.

It began attaching the first of the steel foundations to the ocean floor Sunday. The first one touching the seabed is known in the industry as the "first steel in the water."

The foundations will rise about 70 feet above the waterline, about three miles off southeastern Block Island.

REPUBLIC AIRWAYS-DISRUPTIONS

UNDATED (AP) -- Republic Airways is warning the biggest U.S. airlines that the regional service it provides for them may be disrupted because of a pilot shortage and labor dispute.

The company says it's talking with the airlines about reducing their reliance on Republic planes through the first half of next year.

Shares of Republic Airways lost half of their value today.

The Indianapolis company disclosed late Friday that it faces possible disruptions in the service it provides for American, United, Delta and US Airways. The company says it's facing a pilot shortage because of rules that raised training requirements for new pilots and a standoff in contract talks with the Teamsters, which represents Republic pilots.

Shares of Republic Airways Holdings Inc. are $4.40, or 51.8 percent, to $4.10 in midday trading.

NORFOLK SOUTHERN RESULTS

OMAHA, Neb. (AP) -- Norfolk Southern's 23 percent drop in second-quarter profit follows the same story line as other railroads seeing a sharp decline in coal shipments.

Norfolk Southern posted $433 million net income, which is down from $562 million a year ago.

Its revenue decreased 11 percent to $2.71 billion because coal volume fell 21 percent and total volume declined 2 percent. That revenue figure was also more meager than expected.

Union Pacific and CSX railroads both cited similar challenges when they released results earlier this month.

But Edward Jones analyst Logan Purk says, "Norfolk clearly stands out as the worst of the bunch."

Purk says Norfolk Southern fared worse than its peers because it has more exposure to export coal and its fuel surcharge program has a bigger lag than other railroads.

advertisement
Washington Times
advertisement