DETROIT (WXYZ) - Twenty thousand Detroit city retirees may take hits to their pensions - their two funds underfunded by $3 ½ billion.
Payments not made by the city and, of course, bad investments. Those are all being examined.
One big one has turned into a downtown multimillion dollar question. The Book-Cadillac Hotel sits downtown on Washington Boulevard.
However, many buildings around it are boarded up because it is still largely an undeveloped part of downtown.
When the Book was renovated 7 years ago, it cost $190 million and, get this, 22 layers of financing - says the government - loans, grants, tax incentives in an enterprise zone.
“You have a new board,” says Michelle Martinez-Bassett, the spokesperson for the Detroit General Retirement fund. “You have new members that are on the board. I think that they are reviewing the matter.”
The current general retirement board, along with the police and fire system, control $5 billion in assets. Together they loaned $24 million to the Book-Cadillac - and not a dime has been paid back.
The spokesman for Detroit's Emergency Manager Bill Nowling says this is not the only boondoggle in question.
“The city owns part of an airline,” Nowling says. “It owns different assets that really can't translate into value.”
The Book was built the 1919, grew and then shrank with Detroit closing in 1984. It sat empty until a Cleveland developer took the plunge to renovate and reopen it.
It turns out the pension fund loans are behind other lenders for paybacks, and those loans have been pushed back.
“Many of these investments have been done, it seems, without the proper oversight, Nowling says. “At least they do not have the same type of vetting that security investments have.”
Nobody on the pension board today would talk about this and other deals. They left it to a paid spokesperson.
“We know that the pension funds have been on sure footing,” Martinez-Bassett said. “I think that there's a lot of moving pieces. I think that they're looking at where they are today.”
Detroit’s Emergency Manager is about to roll out an audit of the two employee pension funds to see how many boondoggles like the Book-Cadillac are still on their books.
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