Judge Rules Detroit Is Eligible For Bankruptcy Protection
The former thriving Motor City economy has been in great need of a finical resolution for a while now. Although allowing the city of Detroit’s it’s Chapter 9 bankruptcy to go through will help the city tackle it’s $18 billion debt it will also have some negative effects on the cities citizens.
With the judges ruling today, allowing the city to in fact eligible for for bankruptcy protection, the city will also be allowed to cut municipal employee pensions as it reorganizes its finances. Which is a complete blow to the unions.
During the hearings the unions argued that:
Michigan Gov. Rick Snyder appointed Kevyn Orr as Detroit’s emergency manager explicitly so that he could file for bankruptcy, and that Orr did not negotiate in good faith with the unions. They also said that the bankruptcy filing was unconstitutional because a section of the Michigan constitution protects pensions.
For the almost the past year Detroit reportedly has failed to contribute to its pension funds and will have deferred $100 million in contributions by the end of the year.
The LA times also reports how emergency manager Kevyn Orr
has not said specifically how he would alter pension payments, but he has said some adjustment would need to be made to deal with $3.5 billion of unfunded liabilities.
Leaving Unions to believe that their pensions will be cut in half and that if pensions are cut back in Detroit then other cities and states across the country could follow in the cities footsteps.
Detroit will be the largest U.S. city to be granted bankruptcy protection and will now have to present a outline of a reorganization plan. The City hopes to emerge from bankruptcy by 2014.
Check out the full story on LAtimes.com