Bankruptcy Judge Steven Rhodes will consider litigation over whether Detroit's pledge of tax revenue to pay off voter-approved bonds is a binding obligation or merely a promise that the broke city cannot keep, Reuters reported today. The outcome of the dispute before Judge Rhodes could have a far-reaching impact on municipal finance as unlimited tax general obligation bonds traditionally have been considered secured debt, making them one of the safest bets for investors. Detroit Emergency Manager Kevyn Orr has deemed some $410 million of general obligation bonds outstanding at the end of the city's fiscal 2012 as unsecured debt, and the city defaulted on an Oct. 1 payment on the bonds.
