July 15 (Bloomberg) -- Detroit’s current and retired employees pleaded with the judge overseeing the city’s bankruptcy to limit the financial suffering they face from a reorganization plan that imposes $7.4 billion in cuts on them and other creditors.
“I know that some sacrifices have to be made, but I never thought I would be struggling to get health care,” Jesse Florence, a retired city bus driver, told U.S. Bankruptcy Judge Steven Rhodes today in Detroit federal court. Florence’s health-care premiums jumped from $152 a month to $1,026, he told Rhodes. “This is devastating.”
At the hearing, Rhodes heard from city creditors who aren’t represented by lawyers in Detroit’s record $18 billion bankruptcy. Active and retired city workers, as well as investors, would be forced to take less than the $10.4 billion they are owed if Rhodes approves Detroit’s plan.
Rhodes is to take their comments into consideration when he holds a trial next month on whether to approve the plan. Remaining opponents include bond insurer Syncora Guarantee Inc., which may have to cover losses imposed on bond investors, with some facing a recovery of as little as 11 percent.
Some of today’s objectors expressed disbelief that the city doesn’t have enough money to pay them. Others complained that some pensioners, including police and firefighters, are getting a greater recovery than others.
One homeowner asked Rhodes to block the city from cutting off water to anyone who owed $150 in unpaid bills.
“It is up to you to stop the national and international disgrace,” Kristen Hamel said, drawing applause from others in the courtroom.
Rhodes responded to some of the questions, asking the city to bring in an expert familiar with the water shut-off policy, and urging emergency manager Kevyn Orr to provide more information to individual pensioners about how the city calculated their cuts.
After the lunch break, Darryl A. Latimer, chief customer service officer for the city’s water department, told Rhodes that the current shut-off program began last year with the hiring of a contractor. The average delinquent bill is $540, Latimer said, which would equal several months of missed payments. The average water bill is about $75 a month, he said.
The city puts delinquent customers on payment plans and helps them get financial assistance, he said.
Rhodes told Latimer that the city hasn’t done enough to publicize those financial assistance programs, and urged them to do more than put notices in water bills and hold an informational fair for residents.
“You understand that the city is angry,” Rhodes told Latimer.
Rhodes also asked the city to explain the calculations behind the amounts that some retirees must pay back as part of the reorganization. The city claims that some retirees were overpaid as part of a city-sponsored savings plan.
Attorney Heather Lennox responded on behalf of Orr, saying the “plan isn’t perfect. It certainly isn’t all that we wish it could be.”
Cuts are inevitable, Lennox said, because the city doesn’t have enough money to pay all its debt.
The case is In re City of Detroit, 13-bk-53846, U.S. Bankruptcy Court, Eastern District of Michigan (Detroit).
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