A federal bankruptcy judge granted Detroit unprecedented powers Tuesday to shed billions of dollars in debt, including the ability to slash city employee pensions despite a state constitutional provision protecting them.
In approving the nation's largest-ever municipal filing, Judge Steven Rhodes cleared the way for Detroit's emergency manager to develop a plan to reorganize the city's estimated $18 billion in debt. Beyond cutting worker pensions and retiree health benefits, the city could stiff bondholders and sell city assets such as its water and sewer authority and its priceless art collection.
Municipal bankruptcy experts called particular attention to Rhodes' decision to allow pensions to be put on the chopping block. Some said the move would set a precedent for future municipal bankruptcies. And unions vowed to appeal the decision.