August 12, 2014 at 10:26 pm

Judge weighs delay in Detroit bankruptcy trial, deadline for union contracts

Detroit — U.S. Bankruptcy Judge Steven Rhodes on Tuesday was weighing whether to further delay Detroit’s bankruptcy trial and impose a deadline for two public safety unions to reach contract agreements with the city.

Rhodes said during a status conference earlier in the day that the orders would be forthcoming. As of Tuesday evening, he had not issued any decisions.

In the meantime, Rhodes ruled that Oakland, Macomb and Wayne counties have legal standing to object to Detroit’s debt-cutting plan as interested parties in the city’s bankruptcy case.

The decision follows aggressive objections from the counties during a hearing last month on why suburban leaders should be allowed to assert objections.

“The counties do have standing to assert their objections in the case,” Rhodes said.

Oakland and Macomb counties have opposed the city’s plan to extract $428 million in accelerated pension payments for the Detroit Water and Sewerage Department during the next decade.

Suburban leaders contend the higher pension payments for Detroit’s legacy costs will ultimately be passed on to ratepayers in the form of higher water bills, leaving less money for infrastructure improvements.

Detroit’s attorneys have countered that the suburbs can’t object to the plan because the DWSD is not in default on any contract to provide services to suburban communities.

Oakland County filed a supplemental objection Tuesday to confirmation of the city’s proposed plan, saying it relies on “inaccurate” calculations for shortfalls in the general pension fund. It is asking the court to deny confirmation of the plan in its present form.

After refusing to grant a delay in the Aug. 21 trial last week, Rhodes heard more arguments from creditors, including Syncora Guarantee Inc., seeking to have the trial pushed back, and said he would issue a formal order Tuesday.

The consideration comes after it was revealed last week that the city’s water department approved a plan to refinance almost $5.2 billion in debt.

The move could free up cash for Detroit’s restructuring and potentially speed an exit from bankruptcy court. The plan, approved by Detroit Water and Sewerage commissioners, would also lower the utility’s interest rate and reduce costs.

The plan involves offering secured water bondholders a chance to have the city buy back the bonds.
Staff writers Chad Livengood and Robert Snell contributed.