July 4, 2014 at 1:00 am

Detroit bankruptcy hearing set as deadline for voting on pension, benefit cuts nears

The People Mover in downtown Detroit. (David Coates / The Detroit News)

Detroit — Retirees and other creditors have until Friday to vote on proposed pension and benefit cuts that could help Detroit emerge from bankruptcy court and restructure $18 billion in debt.

With the deadline looming to submit the ballots, however, a federal appeals court has scheduled oral arguments for July 30 on whether Detroit is eligible for bankruptcy relief. The court date could derail a trial set for mid-August on the city’s debt-cutting plan and complicate Detroit’s bid to exit bankruptcy court by early fall.

The city is facing appeals court challenges from several creditors, including two Detroit pension funds.

Detroit’s two retirement systems are urging members to vote yes on the city’s pension-cutting plan and have pledged to drop the appeal if retirees approve the plan.

The plan reduces pensions for non-uniform retirees by 4.5 to 20 percent and reduces annual inflationary increases for retired police and firefighters from 2.25 percent to about 1 percent.

Retiree ballots are due to be returned to the city’s balloting agent in California by July 11 and voting results are expected to be announced July 21.

“This is a very serious matter and people need to vote in terms of the impact on their pension, their family and their life,” Detroit Police and Fire pension fund spokesman Bruce Babiarz said. “

While some may seek to make a political or protest vote, the message is clear that a cram down or Plan B in further bankruptcy proceedings would be far worse than the settlement on the table.”

If one of the classes of retirees rejects the plan, the Police and Fire and General retirement systems will pursue the appeal at the July 30 hearing, pension fund attorney Robert Gordon said.

The vote and a scheduled trial over the city’s debt-cutting plan could be jeopardized by events unfolding in the 6th U.S. Circuit Court of Appeals.

Several creditors have appealed a lower court ruling that Detroit is eligible for bankruptcy relief.

On Wednesday, the appeals court said a three-judge panel would hear oral arguments July 30.

The date was picked to give the appeals court enough time to rule on the city’s eligibility before U.S. Bankruptcy Judge Steven Rhodes holds a mid-August trial over Detroit’s debt-cutting plan.

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