10 years since bankruptcy, Detroit’s finances are better but city workers and retirees feel burned

Jul 16, 2023, 9:14 PM

The new 685-foot tall tower under construction on the former Hudson's site is seen, Friday, July 7,...

The new 685-foot tall tower under construction on the former Hudson's site is seen, Friday, July 7, 2023, in Detroit. On July 18, 2013, a state-appointed manager made Detroit the largest U.S. city to file for bankruptcy. A decade later, the Motor City has risen from the ashes of insolvency, with balanced budgets, revenue increases and millions of dollars socked away. (AP Photo/Carlos Osorio)

(AP Photo/Carlos Osorio)

DETROIT (AP) — Mike Berent has spent more than 27 years rushing into burning houses in Detroit, pulling people to safety and ensuring his fellow firefighters get out alive.

But as the 52-year-old Detroit Fire Department lieutenant approaches mandatory retirement at age 60, he says one thing is clear: He will need to keep working to make ends meet.

“I’m trying to put as much money away as a I can,” said Berent, who also works in sales. “A second job affords you to have a little bit of extra.”

Thousands of city employees and retirees lost big on July 18, 2013, when a state-appointed manager made Detroit the largest U.S. city to file for bankruptcy.

A decade later, the Motor City has risen from the ashes of insolvency, with balanced budgets, revenue increases and millions of dollars socked away. But Berent and others who spent years on Detroit’s payroll say they can’t help but feel left behind.

“You become a firefighter because that’s your passion and you’ll make a decent living. You would retire with a good pension,” said Berent, who told The Associated Press that his monthly pension payments will be more than $1,000 lower than expected due to the bankruptcy.

Berent’s city-funded healthcare also ends with retirement, five years before he’s eligible for Medicare.

“I don’t see us ever getting healthcare back,” he said. “It’s going to have to come out of our pensions.”

The architect of the bankruptcy filing was Kevyn Orr, a lawyer hired by then-Gov. Rick Snyder in 2013 to fix Detroit’s budget deficit and its underfunded pensions, healthcare costs and bond payments.

Detroit exited bankruptcy in December 2014 with about $7 billion in debt restructured or wiped out and $1.7 billion set aside to improve city services. Businesses, foundations and the state donated more than $800 million to soften the pension cuts and preclude the sale of city-owned art.

The pension cuts were necessary, Orr insisted.

“I’ve read about the pain, the very real pain,” he told the AP. “But the alternatives of what was going to happen — just on the math — would have been significantly worse.”

In 2013, Detroit had some 21,000 retired workers who were owed benefits, with underfunded obligations of about $3.5 billion for pensions and $5.7 billion for retiree health coverage.

In the months before the bankruptcy, state-backed bond money helped the city meet payroll for its 10,000 employees.

“Those problems were well on their way years or decades before we got there,” Orr said.

Daniel Varner, the president and chief executive of Goodwill Industries of Greater Detroit, which provides on-the-job training and skilled labor to businesses, called the bankruptcy filing “heartbreaking.”

“In some ways, it represented the failure of all of us who had been working so hard to achieve the (city’s) renaissance,” Varner said. “On the flip side … maybe this is the fresh start? I think we’ve been making great progress.”

The city, which was subject to state oversight and a state-monitored spending plan for years after the bankruptcy filing, has reported nine consecutive years of balanced budgets and strong cash surpluses.

Mike Duggan was elected mayor and took office in 2014. Hoping to slow the exodus of people and businesses from Detroit — its population plummeted from about 1.8 million in 1950 to below 700,000 in 2013 — and increase the tax base, Duggan’s administration began pushing improvements to city services and quality of life.

More than 24,000 abandoned houses and other vacant structures were demolished, mostly using federal funds. Thousands more were renovated and put on the market to attract or keep families in Detroit.

“Very little of our recovery had anything to do with the bankruptcy,” Duggan said Tuesday, pointing to business developments and neighborhood improvement projects. “The economic development strategy is what’s driving it.”

Jay Aho and his wife, Tanya, have seen improvements in their eastside neighborhood. Along nearby Sylvester Street, about half a dozen vacant homes have been torn down and just one ramshackle house remains, with peeling siding, sagging roof and surrounded by waist-high weeds, trees and a thriving rose bush. Rabbits, deer and pheasants have started to appear in the grass and weed-filled vacant lots.

“We benefit from having lots of open space, beautiful surroundings,” said Jay Aho, 49.

Born in southwest Detroit, 32-year-old Arielle Kyer also sees improvements.

“There were no parks like what there are now,” she said at a ribbon-cutting ceremony for a new splash pad attended by Duggan. “Everything is different.”

Downtown, boutique hotels and upscale restaurants have sprung up, and a 685-foot (208-meter) skyscraper under construction is expected to host a hotel, a restaurant, shops, offices and residential units.

Corktown, a neighborhood just east of downtown, got a boost in 2018 when Ford Motor Co. bought and began renovating the hulking Michigan Central train station, which for years was a symbol of the city’s blight. The building will be part of a campus focusing on autonomous vehicles.

Ford’s move has attracted other investment, according to Aaron Black, the general manager of the nearby $75 million Godfrey Hotel, which is scheduled to open this year and whose owners also are developing homes in the neighborhood.

“The (city’s) brand may have been dented, ”Black said. “The brand may have been tarnished, but Detroit is head and shoulders above a lot of other competitive cities.”

Some warn against too much optimism.

Detroit’s two pension systems have been making monthly payments to retirees without any contributions from the city for the past decade. That is set to change next year when the city will be required to resume contributions from a city-created fund that now stands at about $470 million.

Detroit’s Chief Financial Officer Jay Rising says both pension systems are better funded than a decade ago. But Leonard Gilroy, senior managing director of the Washington-based Reason Foundation’s Pension Integrity Project, says his data shows the systems’ funding levels near where they were in 2013.

“It’s a big moment for the city that presents daunting future fiscal challenges to avoid further deterioration of the pensions,” Gilroy said. “They are getting the keys back to fund their pension system, which would be a huge responsibility if these plans were fully funded, and is that much more of a challenge given their fragile, underfunded state.”

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10 years since bankruptcy, Detroit’s finances are better but city workers and retirees feel burned