http://hotair.com/archives/2013/07/07/oh-good-broke-cities-looking-to-unload-expensive-retirees-on-obamacare-i-e-taxpayers/
Oh, good: Broke cities looking to unload expensive retirees on ObamaCare, i.e. taxpayers
POSTED AT 6:31 PM ON JULY 7, 2013 BY ERIKA JOHNSEN
The Obama administration’s short-term panicked desperation to avoid ObamaCare-related consequences in the 2014 midterms is only matched by their relatively longer-term panicked desperation to convince young and healthy Americans to get with the program en masse. They’re going to need a heck of a lot of people with relatively inexpensive health-insurance needs to participate in and subsequently subsidize the inherently riskier and more expensive insurance pools the program creates by deliberate design — a redistributive fact of which the law’s supporters and administrators are all too aware.
But, heck, as long as ObamaCare is offering what we’re promised will be this miraculously subsidized (affordable?) health care system, why shouldn’t municipalities with insolvent pension and benefit programs take this wondrous opportunity to siphon off some of their incurred costs and just ease them onto the national system? Problem, solved — amirite? ViaBloomberg:
Detroit is facing bankruptcy, and Chicago wants to cut retiree benefit costs. Both are turning to President Barack Obama’s health-care overhaul in what could become a road map for cash-strapped cities. …“That will become an option that I think a lot of employers and a lot of cities would look at,” said Ario, now a managing director of Manatt Health Solutions, a Washington consulting firm that advises insurers. …In Detroit, reducing benefits for 30,000 employees and retirees is part of Emergency Manager Kevyn Orr’s plan to avoid the largest U.S. municipal bankruptcy by erasing a $386 million deficit and attacking a long-term debt of at least $17 billion.The city had 19,389 retirees eligible for health, life-insurance and death benefits as of June 30, 2011, according to Orr’s plan. The insurance benefits cost the city $177.4 million in fiscal 2012. Retirees contributed an additional $23.5 million.Orr wants to give current and former workers health-reimbursement accounts. The city would pay from $100 to $250 a month to help with medical costs or premiums under the Patient Protection and Affordable Care Act, according to a proposal to city unions.That would cost the city as little as $27.5 million annually, according to Orr’s plan.
If more indebted cities (states?!) cotton on to the potential for savings by ending their plans with currently insured older Americans and transferring them to the exchanges, then who knows what this will look like, but I would suggest that ObamaCare and the prices for the younger subsidizers are going to get still more expensive than anyone predicted. …Ah, well. After all, who could’ve seen this coming, really?
http://www.freep.com/article/20130703/COL33/307030144/
Detroit emergency manager Kevyn Orr, locked in a tense standoff with creditors whom he has asked to accept a fraction of the $11.4 billion they’re owed, will load a group of about 25 bankers on a city bus next Wednesday, and lead them on a tour of some of Detroit’s most desperately blighted areas.
They’ll start downtown at Grand River Avenue, and travel out to Brightmoor, where hundreds of abandoned homes and businesses populate gap-toothed blocks that used to teem with residential and commercial activity. Then the tour might also cut across 7 Mile to the east side, and come back down Gratiot, a hollowed thoroughfare that runs through the 48205 ZIP code, which led the city in shootings and homicides in 2011.
The idea? To prick the consciences of the city’s creditors, and raise some empathy capital with them in hopes that they’ll avoid forcing Detroit into bankruptcy.
“If they can see what it’s like for Detroiters, what they endure every day in this city, I think they’ll begin to understand what’s at stake,” Orr said after an interview he gave during a taping of the Detroit Public Television show “MiWeek.” (I cohost the show with broadcaster Christy McDonald and Detroit News Editorial Page Editor Nolan Finley.)
“Imagine what it’s like to be a mother riding that bus with no air-conditioning, that shows up late and takes an hour and a half to get you where you need to go. See what these neighborhoods look like, what you travel through and go home to every day. I think people don’t really believe it when I describe it. Even my friends in Washington say it can’t be as dire as what I’m describing. But it is.”
Orr said if the creditors don’t take the deal he has offered, the city’s conditions — the blight, the lack of services, the profound deterioration of once-thriving neighborhoods — could get worse. “I need them to see that up-close,” he said.
All of the city’s creditors — which include institutions like Bank of America and Financial Guaranty Insurance — were invited to take the tour. Orr spokesman Bill Nowling said Wednesday that he expected about 25 to participate.
The leverage Orr is seeking here could be key in his negotiations to avoid having Detroit file the largest municipal bankruptcy in history.
Last month, he laid out a plan to shave billions off what the city owes most of its creditors and redirect the money Detroit spends servicing its huge debt toward service enhancement. It was the first time in my memory that any leader in Detroit has suggested putting residents’ needs first — before the interests of the banks or, for that matter, the public employees whose costs have also drained city coffers.
Orr stopped paying the city’s unsecured creditors in mid-June, and would like to settle their $11.4 billion in claims with about $2 billion.
The municipal finance markets have reacted quite coolly to Orr’s offer, principally because of how he has defined which creditors are unsecured.
In most municipal restructurings, banks and investors who have issued general obligation bonds on behalf of a government (money cities typically use for capital investments like infrastructure) are considered secured, and given preferential treatment in payouts. But Orr has said because their security interest is tax revenue, and Detroit is at its maximum allowable tax rate, those debts are unsecured, at least in Detroit’s case.
According to an article in the Bond Buyer, a trade publication that tracks municipal finance issues, some creditors fear that if Detroit can reclassify general obligation bondholders as unsecured, it could set a precedent for other cities and send financial shock waves throughout the municipal bond market.
So Orr has some real convincing to do if he’s going to have his way, and his tour is a pretty bold stab at putting Detroit’s financial woes into important context.
“There are other cities with these problems, yes, but there’s nothing like what we’re facing in Detroit,” Orr said. “I don’t think you can consider this a precedent because of the depth of the problems here. It’s just different.”
Will a tour be enough? It’s definitely unconventional. Creditors, typically, are about money. We owe it; they want us to pay it. They answer to investors, who are concerned with returns.
But I also think the reality that Orr wants them to see is a shocker. Those of us who live here have become inured to what it’s like to drive through the city’s neighborhoods for the first time; the conditions you can find in any urban center, but the depth and breadth of it? Nowhere else.
Orr said he hopes the creditors start to see the connection between the debt they’re owed and the survival of residents. “I hope they start to see that no city should be like this,” he said. “Not in America.”
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