Detroit Gap Reveals Industry Dispute on Pension Math

By MARY WILLIAMS WALSH

Until mid-June, there was one ray of hope in Detroit’s gathering storm: For all the city’s problems, its pension fund was in pretty good shape. If the city went under, its thousands of retired clerks, police officers, bus drivers and other workers would still be safe.

Then came bad news. Seemingly out of nowhere, a $3.5 billion hole appeared in Detroit’s pension system, courtesy of calculations by a firm hired by the city’s emergency manager.

Retirees were shaken. Pension trustees said it must be a trick. The holders of some of Detroit’s bonds realized in shock that if the city filed for bankruptcy — as it finally did on Thursday — their claims would have even more competition for whatever small pot of money is available.