According to a recent report by Reuters, Detroit’s two public pension funds will file an objection on Monday to the city’s bankruptcy filing on Michigan constitutional grounds. The challenge expected from the pension funds is the first to emerge from among several parties likely to object to the city of Detroit’s claim that it is bankrupt.
For Detroit’s Chapter 9 bankruptcy to proceed, U.S. Bankruptcy Judge Steven Rhodes, who is overseeing the case, must first find the city has proved it is insolvent and negotiated in good faith with its creditors, or that there were too many creditors to make negotiation possible.
In a court filing earlier this month, Detroit released a list of creditors, including current, former and retired workers that filled 3,504 pages. If Detroit is ultimately deemed eligible for municipal bankruptcy, it would be the biggest case in U.S. history.
The city’s two pension boards will claim that Michigan Governor Rick Snyder violated the state’s Constitution when he allowed Detroit’s state-appointed emergency manager,Kevyn Orr, to make the bankruptcy filing. The pension boards will also claim Detroit violated state constitutional language that prohibits the impairment of vested retirement benefits for public workers.
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