Union challenges Detroit's bankruptcy

Detroit's biggest public labor union filed objections on Monday to the city's request for bankruptcy protection, the largest municipal filing in U.S. history and a move aimed at wiping away billions of dollars in debt.

The American Federation of State, County and Municipal Employees Council 25 said Detroit has not proven it is insolvent and has not negotiated in good faith with its creditors. In a filing with the U.S. Bankruptcy Court in Detroit, the union said it was also challenging the constitutionality of the federal bankruptcy code, arguing that it encroaches on states' rights.

The union also said Michigan's emergency manager law, which enabled Detroit to file for bankruptcy on July 18, violates the state constitution because the law does not explicitly protect retirement benefits for public workers.

The filing by the public labor union came before expected objections from two city pension systems, bond holders, banks and others who hope to convince federal Judge Steven Rhodes not to allow the Chapter 9 petition by Detroit emergency manager Kevyn Orr.

Rhodes set Monday as the eligibility objection deadline. By early Monday evening, more than 100 objections had been filed including those made by several smaller city unions.

The AFSCME, the AFL-CIO and city retirees claim in their objection that Michigan's emergency manager law - which gives Orr his authority - impairs vested pension rights violating the state Constitution.

"The city, led by its unelected, politically appointed emergency manager ... hastily commenced this unconstitutional, unlawfully authorized Chapter 9 proceeding seeking the haven of bankruptcy to illegally attempt to slash pension and other post-employment benefit obligations and cram such reductions down the throats of current and former city employees such as the AFSCME Detroit Employees," read their objection.

Orr, hired in March by the state to fix Detroit's finances, has said there are no other options for Detroit. He filed for bankruptcy on July 18, claiming the city has at least $18 billion in liabilities, from underfunded pensions and health care costs to bonds that lack city revenue to be paid off.

Detroit's largest unsecured creditors are its two pension funds, which have claims totaling $3.74 billion in estimated unfunded liabilities, according to a court filing by the city.

The Detroit Institute of Arts said on Monday it will not file an objection to the bankruptcy.

The DIA has become embroiled in the city's case because its assets, which include works by Van Gogh and Matisse, could be sold to pay Detroit's debt.

However, Orr has said he hopes he does not have to sell DIA assets.

Rhodes has scheduled October 23 for the start of a hearing to determine if Detroit is eligible to file for bankruptcy under Chapter 9.

If Detroit is deemed eligible for municipal bankruptcy, it would be the biggest such case in U.S. history.

Since 1954, 29 of 62 municipal bankruptcies pursued in the U.S. have been dismissed.

Al Jazeera and wire services