FLINT, MI – Flint officials are banking on cuts to retiree benefits to ensure the city’s longterm financial health.
If the court does not allow Flint to make the cuts, it would place
officials previously said.
Reinstating the benefits would push the city toward bankruptcy where benefits would be significantly reduced or eliminated and retiree pensions could also be negatively impacted, the city previously said.
Is bankruptcy Flint’s best option? It depends, said Tim Wittebort, corporate transaction attorney with Howard & Howard in Royal Oak.
“I don’t know enough about the financial situation, whether they are coming out of the debt or not. If this is going to put them farther behind, I think (bankruptcy) is a realistic option,” said Wittebort, who often represents municipalities and was appointed by former Michigan Gov. Jennifer Granholm to be a member of the financial review team formed to oversee and assist Pontiac with its financial deficit. “Bankruptcy does provide some options, but it’s a last resort.”
To file for bankruptcy, the action would first have to be recommended by a city’s emergency manager and then approved by the governor.
Flint Emergency Manager Darnell Earley did not comment on the issue Friday, but he has previously said Flint’s financial struggle is something that can be managed.
If Flint were to go into bankruptcy, it would basically provide the city a chance to reduce some of its debt faster and start a budget surplus to provide more services to citizens, Wittebort said.
But it would also ruin the city’s credit and possibly the credit of the entire state, he said, especially since it would be the second city in the state to file for bankruptcy.
A judge approved Detroit’s bankruptcy in December.
“Surrounding communities could be hurt. Credit ratings could be hurt, interest rates could be higher, municipalities (might) not be able to borrow at all,” Wittebort said.
The question comes down to whether Flint has the money to pay the pension benefits, he said. If it can't and it will impair the city's ability to provide basic services such as fire, police and utilities, then bankruptcy might be an option, Wittebort said.
“If they can’t pay the obligations, it doesn’t matter what the judge decides. It could very well be that Flint doesn’t have the money to make the payments, and then what? This is all very new.”
Dominic Adams is a reporter for The Flint Journal. Contact him at dadams5@mlive.com or 810-241-8803. Follow him on Twitter, Facebook or Google+.