August 16, 2013 at 1:00 am

Detroit's eligibility for Ch. 9 at issue

City's police and firefighter pension funds to challenge

Detroit firefighters protested before a bankruptcy hearing at federal court on July 24. (David Coates / The Detroit News)

Detroit— The city’s police and firefighters pension fund said Thursday it will object to Detroit’s eligibility for bankruptcy, arguing Gov. Rick Snyder failed to protect unconstitutional cuts to pension benefits when he authorized the filing.

The pension board met with its legal team for nearly three hours Thursday before deciding to file its objections to Detroit’s eligibility by the Monday deadline set by U.S. Bankruptcy Judge Steven Rhodes.

“The legal team is going to object to the validity of the governor’s authorization of the bankruptcy filing as unconstitutional,” said Bruce Babiarz, a spokesman for the Detroit Police and Fire Retirement System. “The argument is he did not condition his authorization upon preserving the constitutional protection of accrued pension benefits.”

Snyder’s office has contended the July 18 bankruptcy filing was valid. City attorneys have argued that the filing doesn’t mean pensions will necessarily be cut.

But his emergency manager, Kevyn Orr, has said the city can’t afford its obligations to retirees and pensions will have to be cut as part of an overall plan to pare down $18.5 billion in city debt and long-term liabilities.

The police and firefighters pension fund also plans to object to the retiree committee being formed by the U.S. Trustee’s office to represent retiree interests during debt negotiations with Orr.

City retiree groups have expressed concerns that labor unions may seek to crowd them out in favor of dues-paying members in the fight for preserving pensions and retiree health insurance.

“Such an appointment (of a committee) should not excuse the city from negotiating with the retirement system,” Babiarz said.

The retirement system has also scheduled a meeting with Orr’s team on Monday to discuss the level of underfunding of the system, he said.

“They are going to bring the actuaries with them and have an opportunity to meet with the emergency manager’s actuary to discuss the level of underfunding,” Babiarz said.

Labor unions, various associations representing retired city workers and other creditors also are expected to file objections to Detroit’s Chapter 9 eligibility by Monday.

Andrea Kenski, a spokeswoman for the city’s other pension fund — the General Retirement System — said Thursday it was not clear whether that fund would file an objection to the city’s bankruptcy eligibility as well.
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