DETROIT (AP) — A judge was expected to announce Tuesdaywhether Detroit can come up with a plan
to get rid of $18 billion indebt in the largest public bankruptcy in U.S. history, a case thatultimately
could crack a shield protecting public pensions and also putthe city’s extraordinary art collection up
for grabs.Judge StevenRhodes will declare whether Detroit is eligible to stay in court, morethan four
months after filing for Chapter 9 protection. It’s the mostcritical decision so far because it could
give local officials a greenlight to scrub the balance sheet and slowly improve the quality of lifein a
city that has lost more than 1 million residents since 1950.Rhodes postponed his decision by an hour to
give the public more time to get through courthouse security."Eligibilitymeans working down a
specific checklist and making sure the city hasdone what it needed to do to be in court. If the city
gets its ticketpunched, it’s game on," said Michael Sweet, a bankruptcy expert who hasadvised
struggling local governments in California.Rhodes’ taskat this stage is limited to deciding if Detroit
has met certainconditions to be in bankruptcy. A local government must do more thanclaim it’s broke.
There must be evidence that Detroit tried to negotiatein "good faith" with creditors or that
such talks were simplyimpossible because of the number of parties and other factors.Duringa nine-day
trial, unions and pension funds with much to lose inbankruptcy vigorously fought the city on the
good-faith requirement,saying a month was not enough time to make deals and avoid the historicfiling
last summer. Detroit emergency manager Kevyn Orr offered justpennies on every dollar owed to
creditors.If Rhodes finds Detroitisn’t eligible for bankruptcy, it likely means the city would have
tosit down again with creditors and try to reach an agreement outside ofcourt. If that fails, the city
could return and file again for Chapter9.But Orr is predicting an "Armageddon-like scenario"
if theChapter 9 petition is rejected Tuesday. He said creditors who have beenowed money since July will
clog the courts with lawsuits to get anythingthey can while the city attempts to stay afloat."The
issue atthis point is very narrow. … I think Detroit will be ruled eligible,"Sweet said. "I
think the judge will find, given the factors the city andthe emergency manager had to deal with, they
did the best they couldwith what they had."Detroit’s largest creditors include twopension funds
that are underfunded by $3.5 billion, according to Orr.The Michigan Constitution protects public
pensions, but Orr believesbankruptcy law trumps that provision. If the city is found eligible
forbankruptcy, pension cuts for 23,000 retirees are possible in the finalplan. Most get less than
$20,000 a year.The city’s art trove atthe Detroit Institute of Arts also could be vulnerable. New York
auctionhouse Christie’s is working on an appraisal of works that could beworth billions. Orr hasn’t
signaled a strategy yet, but even creditorsare demanding a role in determining whether art could be used
to raisemoney.Jacqueline Esters, 66, said she’s willing to take a hit toher $1,006 monthly pension if it
means the city can turn itself around.She retired in 1998 after 30 years with the health department but
foundanother job as a community college teacher.Esters is concernedabout her street. She believes her
house might fetch just $30,000 if sheput it up for sale, compared to $80,000 a decade ago. Someone broke
awindow on a vacant home just two doors away, meaning vandals arelurking."My idea of bankruptcy is
you can start all over again,"Esters said. "I don’t know how much will happen in the
neighborhoods.Until people are held accountable, the city is going to look like adump."Orr was
appointed emergency manager in March under aMichigan law that allows a governor to send a manager to
distressedcities, townships or school districts. A manager has extraordinarypowers to reshape local
finances without interference from electedofficials. But by July, Orr and Gov. Rick Snyder decided
bankruptcy wasDetroit’s best option.___Follow Ed White at http://twitter.com/edwhiteap .Copyright 2013
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