Saturday, January 18, 2014

Treasurer: Retiree health care big reason for b…

DETROIT — The cost of retiree health care, not pensions, was the core reason Detroit filed for bankruptcy, Michigan's former treasurer said Tuesday in the seventh day of the city's bankruptcy trial.

Despite a bitter dispute over whether Detroit emergency manager Kevyn Orr can reduce pensions, former Treasurer Andy Dillon said the city's nearly $6 billion unfunded retiree health care liability was more concerning than its $3.5 billion pension shortfall.

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Dillon, who provided financial oversight to the city and helped hire the city's restructuring consultants, defended his role in recommending the city's July 18 bankruptcy filing, saying he didn't see any way unsecured creditors would agree to steep concessions.

But in a July 10 e-mail that was shown in court, Dillon expressed concern that the filing "looks premeditated" and argued that the state needed to do a better job of explaining why it was necessary.

"I don't think we are making the case why we are giving up so soon to reach an out-of-court settlement," Dillon wrote.

Creditors, who have objected to Detroit's bankruptcy, portrayed Dillon's assessment as evidence that the city rushed into court. If they can prove the city negotiated in bad faith, federal Judge Steven Rhodes could dismiss the city's bankruptcy, forcing Orr back to the bargaining table on debt and long-term obligations that have reached $18 billion.

Earlier in the day, General Counsel Michael Nicholson of the United Auto Workers accused the city of refusing to enter proper negotiations, describing meetings with Orr's team as lectures.

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"I have never, ever been involved in any negotiation where one side speaks," said Nicholson, whose union represents fewer than 200 Detroit library employees and fewer than 200 city retirees.

Stil! l, Dillon, who was treasurer until last week, insisted that bankruptcy was a last resort, echoing earlier testimony in the trial from Michigan Gov. Rick Snyder.

"It was a topic of conversation" as early as March 2012, Dillon said. "But even the thought at that time was we wanted to get to a consent agreement. Chapter 9 was always out there as an issue, but it wasn't front and center."

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Dillon testified for nearly two hours and will return to the stand when the bankruptcy trial resumes at 9 a.m. Thursday.

The trial is expected to wrap up as soon as Friday, but Rhodes isn't expected to rule until later this month.

Day 7 live coverage from the federal courthouse in Detroit

Get all the details as they happened from this Twitter blog by Free Press reporters Nathan Bomey and Alisa Priddle.

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