10 key questions to watch for at Detroit’s historic bankruptcy trial
By Nathan Bomey, Detroit Free Press | |
McClatchy-Tribune Information Services |
1. Is the city's
Rhodes has emphasized that the city must emerge from Chapter 9 bankruptcy with a sensible and comprehensive plan to restore basic services to the city's neglected neighborhoods. But several witnesses are expected to testify that the
"I think it's likely the judge will find the plan feasible even if he expresses concerns,"
2. Is the city's plan to pay bond insurers
The insurers argue the plan amounts to unfair discrimination. Although bankruptcy law allows unsecured creditors to get different treatment, there must be legal justification to do so. Watch for the city's
"Can you justify the disparate treatment?" said
3. How much is the
The city wants to accept the equivalent of
Dubbed the grand bargain, the deal faces significant opposition from
"Obviously, we think the amount of money is basically a song compared to what the value of the art is," said
4. Are pension cuts reasonable?
After ruling in December that retiree pensions can be cut in bankruptcy, Rhodes cautioned that he would not allow inhumane cuts. But he has also said that "profound change" might be necessary in pensions. The city plans to cut general city pension checks by 4.5% and cost-of-living-adjustment (COLA) increases altogether, while slashing police and fire pensioners' COLA from 2.25% to 1%.
Is it satisfactory? One potential problem for the city is that Rhodes has already said he will not consider the personal hardship that cuts will cause to individual pensioners in his decision-making process.
5. Will Mayor
Rhodes has said
"The city has to persuade him that they've got their hands around the plan," said
6. Will the city get a regional water deal done?
The city is still negotiating a potential regional water authority with
7. What is the most reasonable investment rate of return?
The city calculated its pension liabilities based on an expected annual investment rate of return of 6.75%. But creditors argued that figure is unnecessarily low and artificially inflated the city's liabilities, thus allowing higher payments to pensioners than they deserve. Rhodes will hear arguments on both sides.
"We believe the plan is fair," said
8. How much weight will Orr's testimony carry?
During
9. Can
The city's most vociferous opponent will challenge the relevance of testimony by several key witnesses, including
Kopacz's testimony is particularly important. She concluded that the plan of adjustment is feasible -- but barely.
"It's not a ringing endorsement," Bernstein said. "That ought to give you an indication of how difficult this case is."
10. What is the "Rhodes test"?
Rhodes recently hinted that he would apply his own legal assessment of the fairness of
What does Rhodes consider fair? What does Rhodes consider feasible?
The answer to those questions will decide the fate of
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