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Judge Backs Snyder, Orr in Bankruptcy

Detroit retirees and residents protests outside federal courthouse Dec. 3, during bankruptcy ruling. (Photo Credit: Dale Rich)

By T. Kelly and Zenobia Jeffries 

Gov. Rick Snyder’s determination to have Detroit under emergency management; Mayor Dave Bing’s years of deliberate inaction; a reduced tax base; and questionable financial deals with banks brought the city under Chapter 9 bankruptcy with Judge Steven Rhodes historic ruling Dec. 3 the city was eligible.

Rhodes, who had stayed all lawsuits challenging the constitutionality of Emergency Manager law PA 436, determined the city’s eligibility. The ruling makes Detroit the largest municipality in the country to meet the legal criteria. In his 140-page opinion, Judge Rhodes stated PA436 is not unconstitutional as some have claimed. During the trial to determine eligibility he held no hearings on the issues raised by citizens in the lawsuits he put on hold.

Standing at the center of this moment are retirees, city workers and the banks. Rhodes ruled retirees’ pensions are not protected by the state constitution. While he did request a plan of adjustment for pensions separate from other restructuring proposals, he was clear “pensions are not protected.”

Workers who deferred cash from their paychecks for years to save for retirement responded. A joint statement issued by the Boards of the General Retirement System of the City of Detroit and the Police and Fire Retirement System of the City of Detroit said, “The Pensions Clause of the Michigan Constitution absolutely bars any attempt by the City to cut or impair accrued pensions, no matter the reason.

“The State Constitution represents the people’s will. That will cannot be ignored or subverted because it’s financially convenient to do so, or because slashing pensions allows for a city to escape from its constitutionally protected pension benefit obligations.

“We submit that the Pensions Clause requires that the Court has two options. The first option is that it follows the earlier State Court ruling and finds the Emergency Manager Act — or Public Act 436 — unconstitutional, which means the City can’t be a debtor under Chapter 9 under these circumstances. The second option is that it determines that the law is limited by the Pensions Clause of the Michigan Constitution, which requires that as the City works through bankruptcy its pension obligations will be fully respected and upheld.”

Attorney Herb Sanders, who filed the lawsuit against the EM law on behalf of Stand Up for Democracy, said, “My understanding is that the proposal from (EM Orr) is a proposal in which individuals will get 10 cent on the dollar and those who are not will never receive a dime,” Sanders told the Michigan Citizen.  “There are people who have invested in the pension system, who have relied upon that money being available when they do retire and the city at this juncture is not offering them anything.”

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