The Herald Bulletin

Afternoon Update

Breaking News

July 24, 2013

Judge freezes challenges to Detroit bankruptcy

(Continued)

DETROIT —

The Michigan Constitution states that public pensions "shall not be diminished or impaired." An Ingham County judge cited that provision last week when she ordered Snyder and other officials to take no further action in the Detroit bankruptcy.

Sharon Levine, an attorney for a union that represents city workers, urged the bankruptcy judge to let those lawsuits run their course. She said there's no federal insurance for public pensions once they're broken, unlike pensions at private employers.

"Our members who participate at most are at or below $19,000 a year. There is no safety net," Levine said.

Although Rhodes ruled in favor of Detroit, he said opponents will have opportunities to make the same arguments in his court in the future. He has many critical issues ahead, including whether Detroit really is broke and entitled to greatly reduce or wipe out debts. The process could last a year or more.

Michael Nicholson, general counsel for the United Auto Workers, was disappointed with Rhodes' decision.

"State courts have the power to decide what the state constitution means," Nicholson said outside court. "In our view, retirees' rights are a matter of Michigan constitutional rights."

Snyder signed off on Detroit's bankruptcy on July 18, calling it the only practical choice for a city whose population has plummeted to 700,000 from 1.8 million decades ago. Detroit's long-term debt has become an urban millstone.

The governor called Rhodes' decision "excellent" and said it allows one place to settle the city's finances.

In March, Snyder appointed Orr, a bankruptcy expert, as Detroit's emergency manager. Orr had sweeping powers to reshape city finances but recommended bankruptcy after failing to reach any significant deals with creditors, including Wall Street bankers and Detroit pension funds. Many of those creditors, however, accused him of being inflexible and believe bankruptcy always was the plan.

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