Monday, January 27, 2014


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FLINT, MI -- Flint Emergency Manager Darnell Earley said a lawsuit filed by retirees could force the city into bankruptcy and put pensions and health benefits at risk of cuts.

The claim is part of an op-ed Earley sent The Flint Journal following a Jan. 3 decision by the U.S. Sixth Circuit Court of Appeals reinstating an injunction that prohibits the city from modifying health care for city retirees until a federal lawsuit is decided.

Six retirees and the Flint-based United Retired Governmental Employees association filed a lawsuit against the city following a decision in April 2012 by then-emergency manager Michael Brown that would make retirees pay more out of pocket for health coverage.

"If the federal district court's decision is not reversed, it is almost certain that Flint will soon be unable to provide even the most basic level of city services," Earley wrote in the op-ed.

An attorney for the retirees could not be reached for comment.

Earley said reinstating historic health care levels for retirees would cost the city an additional $5 million annually and force the city's unfunded liability for retiree health care to increase to as much as $900,000,000.

"We have done everything possible to avoid becoming insolvent," Earley wrote. "Resolving insolvency could include a potential filing for bankruptcy ..."

A bankruptcy proceeding could severely reduce or eliminate health care coverage for retirees and lead to possible pension cuts, Earley said.

Earley said Friday the op-ed should not be interpreted that a bankruptcy filing is inevitable or that he is pressuring retirees to drop their lawsuit against the city.

"We want the public to understand the severity of this issue," Earley said.

Flint City Council President Scott Kincaid said it's too early for the city to consider filing for bankruptcy.

Kincaid said bankruptcy has always been an option, but it's something the city has been trying to avoid.

"I think that the amount that it's going to cost the city is something we have to look at and figure out how we are going to fix in the long run," Kincaid said.

Kincaid said the city should begin to look at how bankruptcy can be avoided, before the trial on the lawsuit begins.

"Once the trial is done, I think that (bankruptcy) would be the option that is considered." Kincaid said. "I think right now it's premature to file for Chapter 9 Federal Bankruptcy."

Earley said the city has taken multiple steps to fix its financial situation, including raising property taxes and utility rates as well as reducing employee compensation.

"All options have to be considered," Earley said.

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