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12/3/13, "Detroit officially enters bankruptcy," Deseret News, Eric Schulzke
"Detroit is finally officially bankrupt, a federal bankruptcy judge certified on Tuesday.
"It is indeed a momentous day," U.S. bankruptcy judge
Steven Rhodes said at the end of a 90-minute summary of his ruling, USA Today reported.
"We have here a judicial finding that this once-proud city cannot pay
its debts. At the same time, it has an opportunity for a fresh start. I
hope that everybody associated with the city will recognize that
opportunity."
Rhodes surprised some observers by saying he would
support the city in shaving pension expenses, a key bone of contention.
The ruling on pensions has significant implications for others cities
elsewhere. In California, for example, cities such as San Bernardino
could seize the precedent, the Sacramento Bee suggested.
"But one crucial component was establishing that city
officials negotiated in good faith with its creditors before filing for
bankruptcy," The Huffington Post reported.
"Rhodes said that the city did not negotiate in good faith on June 14,
when it met with union leaders and other stakeholders, one month before
filing for bankruptcy. The filing, and particularly Detroit's attempt to
negotiate with creditors, has been hotly contested by unions and other
debtors in court since the trial began in October."
The ruling by Rhodes could help bankrupt San
Bernardino in a potential legal showdown with CalPERS over the sanctity
of employee pensions.
"CalPERS, which argues that pensions can’t be cut,
has tried unsuccessfully to get San Bernardino’s bankruptcy filing
thrown out of court, saying the city is just trying to get out from
under its lawful pension obligations," the Bee reported. "The city
temporarily halted pension contributions to CalPERS right after going
bankrupt, and while it has renewed the payments, it still owes the big
pension fund about $15 million in past-due payments."
"It's a sad day for the people of Detroit," American
Federation of State, County and Municipal Employees attorney Sharon
Levine told CNBC in an interview. Levine said the AFSCME had filed an immediate appeal."
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