council's argument that is you may proceed there shouldn't be any dispute in this case that michigan legislature in adopting a public act for was addressing a legitimate public concern of the financial taggerty of the minister pal of these within its state and i think that certainly there shouldn't be any doubt that the city of flint was in dire financial situation and still is to this day have financial problems based on all the factors that we've laid on the brief extensionally declining revenues substantially declining populations  ever increasing larger piece of their general fund that was committed to retiring health care is there any dispute as to whether these collective bargaining agreements some of which i know quote unquote expired or were modified over time in a dispute as to whether they provided the agreements provided for lifetime health care coverage for retirees  feel i'm not disputing that there were the contracts provided for some lifetime health care benefits but not a specific set of benefits but let me do you dispute that they had a contractual right and that this case is about using the emergency manager powers to modify contracts as opposed to any right that you would have to modify the contract were you not proceeding under the emergency manager well i don't admit that there wouldn't have been a right to proceed without the emergency manager act to change the health care coverage of the retirees in this case because he was emergency manager because he had the the act he chose to use that as an avenue to ok but we are a chance or same question i think it's a preliminary question that this case is not this case is not about flynt's right to change the benefits under the contract it's about flynt's right to change the contract right you they take certainly changed the health care and to the extent that they health care was frozen in the contract specific amount they were changing it but if you if you get into the facts and look at the contracts you would find that one the contracts have language in them that refer to coverages that no longer exist and coverages that are with much less than the coverage that parties are currently currently let me ask you this question was that litigated below it is this we're just trying to find out whether we can proceed with this case under the assumption that  what's at issue is flints well first of all it's not even the ultimate question but the injunction was issued in the context of the question whether flint could change what the contracts otherwise provided for under the authority of the emergency manager as opposed to whether this really doesn't violate the contract i think that the issue is whether or not the city flint could change what coverage they had at the time the emergency manager came in what was being provided to them right by virtue of what by virtue of authority within the contract to change that or vibe virtue of the emergency manager well by virtue of them urgency manager act he chose that route to change the language they did have a certain coverage that was being provided to them and he did change that coverage to make it the same as all active employees had when we evaluate the likelihood of success on the merits we shouldn't be looking at the terms of the contract right we should be looking at the authority under the emergency have a city that was in a dire financial situation he didn't exercise that right and modified the contract and i would point out to you though that what there's real what we're really talking about here is and while whenever they retired because they don't have the same coverage that they had retired so when they when they make this argument that we only were we want the health care coverage we had we retired they don't they don't have that  been changed from time to time after they retired is that that's correct and and how was that accomplished mainly set accomplished because there was something in the contract that allowed it or something in the retirement book that they got or have had that come about i think that mostly came about by changes in the federal law as to what was required to be covered in a policy and one insurance companies were providing and various points in time and you had you had to change because one the product you started out with was no longer available or i can understand that so the thought source of authority there was some change in federal law where any other changes that weren't mandated by some change in federal law i don't know that there were any changes that were either mandated by federal law or by product available by surance compan ok so but it's some point what they were getting turned out to be more than what the active employees were getting is that your point yes ok yes i've got it definitely was so i think that judge time now even if we assume for purposes of this argument that that the emergency manager was exercising a legislative function at the time that he made this decision to make this change and therefore the constitutional provision but impairment of contracts could be triggered that he certainly the changes he made certainly were justified and reasonable in light of the public interest of trying to avert bankruptcies and financial ruin said let's well the retirees argue i think that there is no evidence in the record that the city was contemplating bankruptcy that's one of the stated reasons for these modifications and they also argue as i recall that there were so many other options and alternatives that the city did not consider well whether it be issuing bonds or other retiring the debt over a longer period of time that there were other options and alternatives available to the city so well the trial court speculated as to some things but i don't think there's any evidence in the record where there was evidence put in that there were other alternatives you know for example i don't know but i'm saying that i think that the retirees are going i don't know what evidence there is in the record i don't think that they argue that there would be other options available to the city and maybe your responses there's nothing in the record to show that there are that were that would be my first response that there's nothing in the record that shows there are any other responses nor was there anything in a record that supported the three things that the trial judge kind of calmed down to his like you could you could increase water and sewer rates and come up with money well first of all that would be illegal water sewer funds are are collected based upon a fee basis not a tax and those while those water sewer funds must be used for water and sewer system they could be diverted to the general fund and used to pay health care benefits so is the water is the water system totally self sufficient i think it is with the rate increase that they did at the beginning of this fiscal year that's at issue so there's not general fund money being used for that  i think you also he also said well you could just increase the milage well the general fund milledge there's a limit on that and they were almost to the limit on what they could collect on it so as far as putting a mill first of all you have to put it before the citizens and get them to approve it you can't just create additional milage and secondly they were they were at the close to the statutory limit of milage they could do so but again there was no record to establish that that really was a viable option i mean i'm ok one more question if i could i know your time is expired but i know the manager argues takes the position that these modifications  under the contract clause provision that that even if you are impairing a contract it's not automatically a violation the constitutional provision and one of the elements to look at is whether or not it's a permanent impairment or whether it's a temporary impairment and this case this particular impairment expires and june thirtieth of two thousand and fourteen well that's not that's overhead is the manager problem renewing or extending the modification well you would have to go through the process under the statute to do that if you chose to do that that time which now under four thirty six requires the involvement of the city council and a process if they disagree with that so yes that i think the trial judge also erred when he speculated that there would be some irreparable harm to the plaintiffs in this case who who didn't testify one that they had any specific health care that they were entitled to and really didn't identify any specific harm and he he basically the trial judge basically said that well they could have some medical treatment possibly that they know what they were going to lose some money out of their pockets weren't they yes they definitely are going to lose some they definitely going to have to contribute more out of their pocket than they were previously all right i did have a question for you i don't want to get you off your four factor outlined there but i'm wondering what's happened in the pontiac case where are we with that i talked about the appeal that was before this yeah it's back down in the district court where you know we have filed a application for on that case so it's pending and there has been a letter from the court here directing  the plaintiffs to reply to that application so i don't know where it's going to go from there sorry and then another question is this the only one of these emergency manager cases that you're handling what i'm interested in knowing is do we know how many municipalities in michigan actually have an emergency manager at this point well i'm involved in the pontiac one also all right  hampton hamtramck has an emergency manager just recently which we are doing some work for detroit detroit has an emergency manager and they course have filed bankruptcy right they've taken that route  mercy manager in benton harbor city bend harbor there are a few school districts that also have emergency managers ok so once i can think of at the moment is this is this the institution of the emergency manager thing is is this unique to michigan do you know you know i'm not sure about that other states may have have a similar financial director i guess which indicated that all these other cuts that had been done and the and where they were going to have to come up with his three and a half million dollars if they couldn't use that to reduce the health care was in the police and fire department and this is a city that records as evidence for you that is the number one crime per capita of the united states alice the budget in one one year well i mean again the judge tried is trying to subsume his discretion for that of the emergency manager but there's there's ben def it's an odd we're doing and has been done is you're kicking the can down a road you're making the problem bigger and he decided one because he's required to under the emergency manager act and there's another state law that says you have to balance your budgets of your misspelling and they have put you under a plan if you if you don't and you have a limited time to fix that and they had exhausted that already from previous fiscal years and and the problem you get into is ok so you if you can you borrow some money or delay payment and in the next year's budget is even worse off and you're worse off and pretty soon this is a case and i know a little bit better and pontiac you end up where your debts are seeing had some large obligations for services rendered and you know they owe somebody four million dollars when they just say well look i mean this is for the good of the city we are not going to we're going to pay everybody half they pull out the six biggest accounts payable that they have or you know accounts do and they tell everybody we're really sorry we're going to cut your payment in half can they do that on uk and the emergency manager to do that i'm not sure whether chapter nine of the federal bankruptcy code allows the creditors to move into bankruptcy it is necessarily if you don't pay them are posing bankruptcy  proposing suggesting to you and i'm not sure i know in chapter eleven and seven it's true that if you don't pay your creditors you have through at least three creditors and they can file an application for the bankruptcy so if that's true with chapter nine then you could face  problem where the creditors would take the alternative of trying to run the city under emergency manager way from the city so you're saying you could where you could it and pick up the lawsuits going to bankruptcy court does it is it permissible under the contract clause to pick six contracts and say we're only paying you enough because this is necessary for our solvency well you would still  you if you were going to terminate them completely say ok we're only going to pay half we're never going to pay the other half than that probably would be a violation of the contract pearman provision the constitution if the emergency manager had the authority to do that in my view because it's certainly not temporary you are saying we're going to wipe out completely your obligation if you recall the the early cases on the contract cause provision involve the mortgage environment in the thirty's when the legislatures were taking actions to to delay foreclosures of mortgages they weren't they weren't passing laws that were saying you don't all the mortgage anymore they were passing laws that would delay the foreclosure and give other avenues for the the debtor to pay that over a greater period of time so i think if your example is that we just say we're not going to pay the other half that would one be create a cause of action for breach of contract and two if we were arguing at the merge the manager could do that then we probably would be violation of the contract impairments provisions so you're saying what saves this is that that they're going to pay them back a year later or they're just going to well we're continuing to say that is we are continuing to provide health care coverage we didn't say no more health care coverage so we are providing health care coverage we modified it and what we believe to be a reasonable way considering the light of all of the the factors involved and it is temporary so if the manager doesn't try to do something in june of two thousand and fourteen coverage is to have to revert back to what it was before ok thank you your time has expired thank you very much we'll have your full reb that afternoon they please the court the plaintiffs in a pelleas in this matter are municipal retirees who were promised lifetime health insurance coverage as a result not only of collective bargaining agreements that have not been disputed until we reached the appeal level but also as a result of ordinances and pervasive past practices of providing these benefits that resulted mutually explicit understanding's that this would be in place indefinitely for those that did not have the contractual coverage what happened in this case is that the state of michigan passed the new emergency manager act in known as public act for in two thousand and eleven and flint was ultimately placed in receivership under the act and the very end of two thousand and seven i think it was november over ninety days after the end of that legislative session these orders were issued that purported to modify the contractual obligations to retirees as well as changes that were being made to current contracts and active the that the retirees will be able to obtain comparable health care coverage at least covers this cockroach to that of current employees i don't know if that's in the record or not i just recall seeing that somewhere in the briefing i did that and that in effect the retirees might receive even better coverage than they would have under these old  collective bargaining agreements and an ordinance no that is not what that's not the case now these are cost shifting measures to push the cost of the coverage on to retirees as opposed to  s of course for their health insurance coverage the state came in and passed a new law that requires certain coverage levels and require certain contributions for active and they exempted retirees from those provisions so active had that change as well as some changes that were made by the emergency manager but those those actors are under different contracts of course i'm just trying to find out if everybody suffering that  i mean the world at large seems to be suffering since midnight last night i'm just trying to find out where it is in all of this there is there are there have been changes that have made to the active i don't believe that they're the same plans that applies to retirees because i think that there was a universe of three plans that were provided for actives but certainly changes have been made to act as well just not the subject of the sligo the retiree's plan is not it's  it exists as a contract separate and apart from any collective bargaining agreement or was it a clause in a past collective bargaining i mean they're not under the retiree's are no longer under a collective bargaining agreement  contractual obligation was created under past collective bargaining agreements and the obligations survives the the the exploration ok and out of curiosity why did what did the original agreement that i gather you want to continue to enforce why did it say about modifications in the future they didn't provide for any any ability to modify the  coverage it i don't think contemplated any reductions in coverage at the time because there was no reason to believe that that would be an issue it simply specified that there was a certain level of coverage that was in place and provided for that coverage and that's why the changes came as such a surprise and what how does that contract when you come into well these the contract that provided for  these as part of the record maybe there's a you've agreed to what these contracts provide this is more than one item is a serious selective bargaining agreements that have changed over time the the contract at issue there was no dispute that the contract existed initially and it wasn't a contested issue which is why i don't think that they were introduced the record blow nobody even the april twenty fifth orders when you review them it's very clear that they acknowledge the existence of these contracts and the coverage levels well you know i have to say we don't want to stop you and take up a lot of your time but we get into these it riseth cases all the time where that's the whole that's the whole dispute and so i think we're almost brainwashed into  wanting to know you know what this what this background is so you continue on with your with your presentation i just wondering about things like i have to tell you though i mean one of the changes was apparently that the retiree the covered retiree spouse would no longer be covered if he or she was covered under some other medical plan which doesn't seem altogether unreasonable to me and then there was the  there was the requirement that they sign up for medicare if they were old enough to qualify for medicare is that is that correct many of those whether there were  additional provisions that were in but but i for many of the contracts that was actually a requirement for that that when they received medicare coverage they had supplementary coverage which is a change now in the kind of supplementary coverage it's the government certainly looked me in the sixty five and said go sign up i mean and get off our backs and then what was the third one the deductible  the providers that are willing to accept the coverage and this is where we get into the real irreparable harm that was created as a result of these modifications we've we plan to so testified that for example one of them had to forego a physician that he was they've been seeing for thirty years because a physician no longer you realize how many physicians are going out of play and these days that that's one of the problems we don't nobody any longer can say i want to keep my own physician your expand so give me another one i'm not terribly i think that said i want my own doctor and i'd like to keep her forever but i can't i can't demand that the government allow me to do that if she goes out a plan or the plan changes but it wasn't of course just that there's also the fact that the stress tests that were used to monitor for example mr welch's heart conditions could no longer be covered under the plan so he would had he had a heart attack in one thousand nine hundred six multiple surgeries following that and now the benefit doesn't cover the monitoring of those more more to the point i think for most of the retirees the shift in cost is substantial and we're talking about over a thousand percent here and it in iraq because they are on fixed incomes it forces them to choose between basic necessities like paying their mortgages  and securing health insurance coverage and that's really the source of the irreparable harm here so you're suggesting to me that most of these people are not old enough to qualify for medicare i mean the stress tests for the heart attack seem like something that medicare would cover under the coverage that he was being shifted into some of them there are there are post medicare retirees in there pre medical retirees most both have way they're both kinds of retirees and for for all of this they had retired anticipating a certain level of pension benefit certain level of income and a certain level of health care coverage and i have the citation to the ordinance it's the one code of ordinances chapter thirty five article four section eighty one and it lays out the health insurance coverage that non collective bargaining agreement retirees were entitled to receive with respect to the period of time that these changes are in effect there is actually nothing in these orders that creates a time limit that is as far as i know concocted out of thin air there's nothing on the record to suggest that the collective bargaining agreements that cover the actives are only for two year periods that's where the two years comes from the changes to the retiree benefits are indefinite the difference well yes certainly i think that that indefinite change is way to far more in favor of finding an impairment that substantial than truly temporary changes although i think that in any case a two year change we're talking about retiree benefits is still substantial impairment but i do want to point out that the there is no time period there is no and period and and these orders and perhaps even more importantly the orders themselves contemplate the city being able to come in and make changes in the future after the receivership period ends and what we have here is really an attempt to secure the ability to reduce this cut level of coverage into the future but as you know the city makes the point though that you know they've released per the record they have looked all kinds of options i guess in terms of reducing the deficit and they're really pretty much down now to the police and fire department and the layoff one hundred fifteen public safety officers who are deemed of the essential necessary or do you look at cutting retiree health benefits increasing costs pretty much down that i mean the city is deep in the hole and can't pay everybody that is the argument that the city has made it's an argument that the district court rejected it had record evidence before it that showed that the city refused to consider revenue generating options altogether and there was not a question of that they consider and evaluate and weigh options it was just we won't consider those we're cutting it we're cutting this coverage and that's how we're going to impose about a little less or change the ok i mean are you saying varies based on what the change is these changes are significant changes designed to shift costs onto retirees it's possible to imagine that there might be changes that didn't shift those kind of casandra tyreese but still resulted in cost savings that didn't recreate the kind of irreparable harm we're talking about here that were acceptable what's clear is that the negotiations oh no there was no attempt to negotiate or approaching there's a retiree's association that's plaintiff in this case that the city of one is recognized they did not approach them they approached the active unions who under michigan law don't have any authority to negotiate changes and was there change the result of negotiations i don't believe so i believe that it was a result of a unilateral change that was made which is something that the emergency manager law authorized well would you i mean as i understand it you've got you had very very favorable  retirement benefits in terms of health care you ordinance and under existing law they could make changes but it would have to be comparable benefits so now they say clearly come in it's a good way to save money they want to change everything and you folks are sort of singled out  but balancing that against the needs of the city it would seem that if everybody's pulling in their belts a little maybe it would really reasonable for you folks to do it too so i just want to get back to this with the medicare but there are people who will let's talk about the spouses so if a spouse has insurance or had an opportunity for insurance but didn't take it because it cost money under this system this foust would now have to take it and pay the money or not i believe so yes if they have alternative coverage available they have to take it under the table twenty fifth orders before there were there were contracts that provided some contracts that were later that provided if there was comparable insurance that covered them that they would have an obligation to take it it wasn't implied all contracts but these kinds of changes were simply in this case unilaterally imposed and this applies as far as i can see ok are there people that are being compelled to buy so the medicates supplemental coverage that did not have to buy it before yes and who would those people be they were the police and fire were required to do that and they were denied so before what did they have instead before they had a coverage plan that provided the same level or the same kind of coverage that would the supplementary coverage would have provided and they were they were not required to purchase it ok so basically so they're saying now you go purchase that coverage you can get it from the federal government we're going to carve that out of what we give yes yes that was that was as i understand it that was the that was the change that was made there's yes because there is caution there i mean sure as you seem really i mean you know i i would have to review the record my understanding is yes they were not required to per i know they were not required to purchase that before and now the plan does require them to purchase it  so that that's certainly the case and how much is that that i do not know offhand co counsels as it's about fifty bucks per person per month ok so that's the big that's not the thing that breaking them no no i think that the costs that are the most significant are going to be the cocaine increases the deductible increases and depending on the way that some of the other litigation goes the prescription drug increases as well ok and then i just have one more question now why do you say that they have the discretion not to balance they've been operating deficit from two thousand and seven two thousand and eight two thousand and nine the deficit the existence of the deficit itself is not prohibited what they are concerned primarily as it goes to their their options they didn't consider any other kind of revenue generation and they actually had a plan that this is part of the record they had a plan they didn't fall borrowing now they're nowhere near their cat i'm borrowing i think that they're they're using about eleven million out of the ninety five million that's available so you would counsel said yes yes and that plan that was that was not even considered simply rejected would have involved no abrogation of any contractual  rights whatsoever but it would have produced more debt in the long run well in the long run it would have actually resulted in a balanced budget it wouldn't have produced the same results in the immediate short term that this did but of course our position is that they're not simply allowed to consider their contractual obligations on par with other policy choices and that's consistent with the well let me just tell you what mark and mr gibbs and that is you know we're getting very close here to having the court step in and make policy decisions requiring the spouses to do something else is reasonable but upping the co pay is not reasonable cutting benefits for the retiree's is not reasonable but cutting this over here is reasonable and that those are really the kind of decisions and maybe we do have the wisdom of solomon and we should be making them but frankly we don't want to and we need to be kind of careful in these cases that we don't invite the you know six different municipalities in michigan to come in and let us do the negotiating that apparently didn't happen that's all that's my bully pulpit speech for the day and just to address that point the the court in toledo makes this your job is to evaluate whether there's a substantial impairment whether was reasonable and necessary under the circumstances and that's where looking at the alternatives is is the that is how is it that's how that factors into the analysis and here the district court was able to take a look at what was done and you know there were factors that cast significant doubt on the credibility of the city's witnesses that would be considered they had taken measures that hitchcock just a few points i would agree with them that the order of them urgency manager did not have the time limit on it but if you look at the treasury's department's approval which is part of the process that did it said i'm approving you doing this through june thirtieth two thousand and fourteen i think you'll find that in the meekest brief filed by the attorney general where they they identify that there's a limitation on it also so it's my opinion that as i indicated before the merged management to start all over if he wants to go beyond that day to have to go through that whole process of input from everybody before he could change the medicare issue i think i can answer that for you there there's a medicare part a that everybody is automatically covered by when you turn sixty five the doesn't cost you any out of pocket and is a medicare part b that requires you to make the monthly payment to have that there were a number of retirees who had not signed up for medicare part b and that was part of the order to require them if they were eligible to sign up for and pay medicare part b which means that their wrap around coverage of the city has is less at that not explore revenue generating opportunities and i'm not sure what those what those are mean we have the income tax week and we can't control how much everybody is earning to pay that we have the property tax unfortunately was declining through this recession and we had the state revenue sharing which state of michigan had reduced all municipalities in its revenue sharing it was paying based upon its own financial problems during the recession airy time period we you can possibly go to the voters and ask for a specific milledge for retirees health care we did that in the city of pontiac and what happened they rejected it by about two thirds or three or three fourths vote i think almost somewhere between those two numbers they rejected it you don't want to pay an additional milage to support retiree health care so you mention that the city could have done these things or possibly could have done that as a record reflect whether the city did engage in any of this analysis i don't think that there was questions asked about that particular of those particular points that's why i say i think if you look at the record you see that the judge is coming up with with speculative ideas of alternatives but without any record that would say they were even viable on my mind although i would admit that the city didn't put it out to the citizens that from my experience it wouldn't have been a viable option because the citizens feel they already feel they're overburdened in taxes and would have rejected it well they have all of us here well i mean it really depends upon how you put it to them if you put it to them as here's a special milage to pay the retirees everybody's going to say no but if you look at your budget and you say we have a contractual obligation to pay the right tyrese let's put out a much milledge to maintain police and fire people may look at it differently well it would be t services that would be the main take retiree health care if you if you give them that proposal now but why why would you how do you decide what the millage is for you have to describe the purpose of the militia and the language that the balance so that the people coming voting can read it and say ok i'm voting for i know i'm asking you a question how do you decide that the extra money is for the retirees as opposed to we need more money to do something to meet a different obligation well we already have a police and fire milledge for operation of police and fire ok citizens that have tried to raise that and that that was that was that was on the last ballot and what happened they they voted for that ok so you could