Detroit bankruptcy trial enters 6th day

City's emergency manager back in witness seat

11/4/2013

DETROIT —  A judge who must decide whether Detroit can get a makeover in bankruptcy court suddenly challenged the city’s emergency manager today over remarks made during the summer suggesting pensions would be safe in any restructuring.

Emergency manager Kevyn Orr had told the public weeks before the July bankruptcy filing that pensions were “sacrosanct” under the Michigan Constitution. Judge Steven Rhodes interrupted friendly questioning by a city lawyer today and asked Orr, “What would you say to that retiree now?”

Orr, near the end of his fourth day on the stand, answered in legal terms, saying rights to a full pension could be trumped by federal law in a bankruptcy.

“That’s a bit different than sacrosanct,” the judge said.

Attorneys for unions and pension funds, worried about benefit cuts, have challenged Detroit’s eligibility to fix its finances under Chapter 9 bankruptcy. Detroit is the largest city to undergo such a filing in U.S. history.

They claim the city failed to hold “good-faith” negotiations with them before the July filing, a key step that’s needed to be eligible to recast $18 billion in debt. Orr has said pension funds are underfunded by $3.5 billion.

The judge has expressed concerns about the city’s 23,000 pensioners. In September, after hearing retirees speak all day at a court hearing, Rhodes urged Orr and Gov. Rick Snyder to listen to a recording of their anxieties and fears.

During Orr’s cross-examination today, an attorney for police and firefighters presented a July 12 letter to the city, dated six days before the bankruptcy, that signaled a willingness to discuss pension proposals. The letter also asked for specifics from Orr’s team.

“I know there were a lot of discussions. I don’t know if they were provided with specific proposals,” Orr testified.

Later during Orr’s testimony, attorneys for the city introduced spring letters from unions that said they could not negotiate on behalf of current retirees.