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http://www.freep.com/story/news/local/michigan/detroit/2016/05/22/detroit-picks-firm-help-fix-195m-pension-shortfall/84337476/

Detroit is closer to figuring out how to address a hole in pension funding that is far larger than it had anticipated when it exited from bankruptcy.

The city in March put out requests for proposals seeking national firms with expertise in public pension plans to advise the city on how best to address a $195-million payment to the city's two pension plans that comes due in 2024, under terms of the city's exit from the nation's largest Chapter 9 municipal bankruptcy.

Detroit's bankruptcy exit plan, approved in December 2014, gave the city breathing room before it had to make payments to its two pension plans — the General Retirement System and the Police and Fire Retirement System — on the assumption that the city would be better able to pay once its tax base recovered post-bankruptcy. The bankruptcy blueprint called for Detroit to begin making pension payments with a $112.6-million installment in 2024.

The city now says that actuarial assumptions used in the bankruptcy were inaccurate and outdated. City officials said that new actuarial reports last year by the Gabriel, Roeder, Smith & Co. firm project Detroit may have to pay $491 million over a 30-year period beginning in 2024, including the $195-million payment the first year.

It's a serious hit to Detroit's budget, an increase of $83.4 million that represents about 8% of the city's annual $1-billion general fund budget. Naglick and Hill say it could mean diverting money that was supposed to be spent on reinvesting in critical city services.

Mayor Mike Duggan said the city's pension adviser will help determine whether it's best to pay money directly to the pension funds, set it aside to pay into the funds later, or use other alternatives.

Duggan, in his State of the City speech in February, threatened to sue Detroit's bankruptcy consultants, saying they were paid $177 million and ended up leaving the city with a $491-million hole in pension funding. Possible legal action is still being reviewed by the city's Law Department, Duggan spokesman John Roach said.

City officials have told the Financial Review Commission, the body set up by the bankruptcy to watch the city’s books and decisions for years, that Detroit could end up paying $30 million to the pension funds through an amendment to the 2016-17 budget, three times what it initially proposed, using the city's budget surplus.

Experts have long warned that the City of Detroit could be felled again if it failed to address its pension obligations, even as the city was set to emerge from bankruptcy free of $7 billion in long-term obligations.

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