Pricey pensions for Detroit's roller-coaster for rich people

world | Feb 27, 2011 | By Tim Gantert

Barbara Hansen made $114,815 in 2010 as general manager of Detroit Transportation Corporation. DTC exists to operate the Detroit People Mover, the municipal rail system that serves downtown Detroit.

Hansen also received a $14,696 pension contribution made by her employer last year. It is a benefit DTC employees get that far exceeds the private sector. The DTC contributes 12.8 percent of W-2 wages for employees’ pensions, more than double the payment made to a typical private sector employee with a retirement benefit.

“That’s not where you want to be,” said Rick Dreyfuss, a pension expert and adjunct scholar at the Mackinac Center for Public Policy. “That wouldn’t be sustainable in the long term.”

In 2010 the DTC contributed $517,852 to employee pension plans for 81 employees, according to documents received in a Freedom of Information Act request. Had the DTC contributions been more in line with the private sector, the transit system could have saved $250,000.

The DTC’s outsized pension contributions are part of a $5.7 billion-a-year gap between what private sector and public sector employees receive in benefits.

A 2010 study done by the Mackinac Center compared public employee retirement benefit costs to private sector employers. It used a survey of 24 large Michigan companies with a combined total of more than 600,000 salaried employees. The average employer retirement contribution for those private sector employees was just over six percent. The Mackinac Center study also notes that typical Fortune 100 workers covered only by a defined-contribution “401k” type retirement plan receive company contributions of 5.77 percent of pay for their retirement funds.

According to 2009 data provided to the Federal Transit Administration, the People Mover required a $6.2 million operating subsidy from Detroit taxpayers and another $4.3 million from the state of Michigan for a total operating cost tax subsidy of 81 percent. Fares from riders contributed just 7 percent of the People Mover’s operating costs.

The operating expense to move the average rider one mile on the People Mover was $4.28. The People Mover operates a single line in downtown Detroit that is less than 3 miles long.

For comparison, fares from users of the Chicago Transit Authority’s rail system and buses paid 39 percent of the total operating costs in 2009. Moving the average rider one mile on the CTA’s rail lines required 38 cents.

The Detroit Department of Transportation operates buses within the city – many of which ride directly underneath the People Mover’s single track. Fare revenues amounted to 16 percent of DDOT operating costs in 2009. DDOT’s cost to move one passenger one mile was 82 cents.

Tim Gantert writes for the Mackinac Center for Public Policy.



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