Detroit agrees to bankruptcy plan, pension cuts
In a major step forward for Detroit's efforts to overcome bankruptcy, the city's retirees and active employees have approved the city's proposed debt-cutting plan late Monday.
The approval by 82 percent of police and fire retirees and 73 percent of general pensioners paves the way for the so-called "grand bargain."
Under the plan, which still must be approved by a bankruptcy judge, most retirees would face a 4.5 percent pension cut and lose annual inflation adjustments. Retired police officers and firefighters would lose a portion of their annual cost-of-living raise. The approval also triggers $816 million from the state of Michigan, foundations and the Detroit Institute of Arts.
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In a statement, Detroit emergency manager and the architect of the "grand bargain" Kevyn Orr called the results a "positive decision" for both pensioners and the city and said, "The voting shows strong support for the City's plan to adjust its debts and for the investment necessary to provide essential services and put Detroit on secure financial footing."
The vote results were posted in a 371-page filing originally slated to be presented to bankruptcy judge Steven Rhodes at hearing on Monday.
Judge Rhodes addressed the growing controversy around water shutoffs at the same hearing Monday. He issued a 15-day water shutoff moratorium after a group of Detroit residents filed suit against the city claiming a shutdown of water services to about 30,000 low-income households violated their constitutional rights. Customers of Detroit's Water and Sewerage Department with delinquent accounts are to use this two-week period to get on a payment plan. The water department stopped service to more than 7,000 homes and businesses last month, compared to only 1,500 in the same month last year. Thousands protested the shutoffs last week in downtown Detroit, including Hollywood actor Mark Ruffalo.
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Judge Rhodes also heard a motion from bond insurer Syncora on their request to delay the bankruptcy trial - scheduled for August 14 - by six weeks. The company is in the process of appealing a U.S. District Court ruling that Detroit is entitled to keep casino tax revenue. Oral arguments in Syncora's appeal are scheduled for July 30, and a win would mean a reduced pot of money for Detroit to distribute to creditors, jeopardizing Detroit's entire plan to exit bankruptcy.
In asking to delay the bankruptcy trial, Syncora attorneys told Judge Rhodes the city has failed to turn over key documents, but that they are deposing Orr Tuesday regardless. Rhodes said he would rule on the motion on the delay in the coming days.
-CNBC's Betsy Cline
