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Bankruptcy Judge Steven Rhodes said that it was an easy legal decision to authorize pension reductions in Detroit's bankruptcy but that he felt still compassion for the city's retirees and citizens who suffered because of the city's financial collapse and water shutoffs, the Detroit Free Press reported today. Judge Rhodes, who presided over the largest municipal bankruptcy in U.S. history from start to finish, said that he invited citizens to speak in his courtroom on multiple occasions during the case because he wanted to hear their input. "I was genuinely interested in what their concerns were and how I could possibly deal with them, if I could,” Judge Rhodes said. Still, his groundbreaking ruling on Dec. 3, 2013 giving Detroit emergency manager Kevyn Orr the authority to reduce the city's pension obligations was prudent, the judge said. Michigan's Constitution describes public pensions as a contractual obligation that cannot be cut, but federal bankruptcy law allows contracts to be severed. "I have to say that from a legal perspective, it was not a particularly difficult decision," he said.

Bankruptcy Court Judge Steven Rhodes ruled yesterday that the nearly $178 million charged to Detroit by law firms and consultants for fees and expenses in its historic chapter 9 case was reasonable, Reuters reported yesterday. Judge Rhodes said that he based his decision mainly on the complexity of the bankruptcy case filed in July 2013 as well as substantial reductions that the firms agreed to make in their bills. "The city is now on a path to success precisely because of the expertise, skill, commitment, endurance, personal sacrifice, civility and proficiency of all of the professionals in the case, including most certainly those whose fees are subject to review in this opinion," the judge wrote.

Detroit Mayor Mike Duggan said that the post-bankruptcy city will record its first balanced budget since 2002 when the current fiscal year ends on June 30, Reuters reported yesterday. "We still have to run a very tight budget every single week in order to stay on track," Duggan cautioned in his state of the city address on Tuesday. He added that while Detroit must report to a state-created financial review commission, that oversight will end if the city pays its bills and balances its budget for three straight years. Detroit exited the biggest municipal bankruptcy in U.S. history in December, shedding about $7 billion of its $18 billion of debt and obligations. The end of the historic bankruptcy also marked the departure of state-appointed emergency manager Kevyn Orr and the return of power to run the city to Detroit's elected officials. Duggan said the city continues to work on the Great Lakes Water Authority, a deal between the city and three counties to regionalize water and sewer services. The deal, which was a key component of the city's debt adjustment plan, ran into a snag when Oakland County Executive L. Brooks Patterson raised concerns about the lack of new audited financial statements for the Detroit Water and Sewerage Department amid fears that declining revenue will lead to big rate increases. A Feb. 6 order by Bankruptcy Judge Steven Rhodes indicated that mediation was continuing over the water authority.

Detroit may offer city employees a 50 percent discount on homes sold through the city's auction program as part of its efforts to rebound after exiting its historic bankruptcy in December, Reuters reported yesterday. The proposal introduced to the City Council on Tuesday is for current city employees, their families and retired city workers. The idea is to encourage families to repopulate devastated neighborhoods that have seen a decades-long exodus by residents. The issue will be discussed tomorrow by members of the planning and economic development committee, who will decide whether to recommend it to the full council. If approved, the program could take effect by mid-February.

Municipal-bond prices have fallen further than other debt amid rising U.S. interest rates this summer, exacerbating investor jitters spurred by Detroit's record-setting bankruptcy filing, the Wall Street Journal reported today. Bonds from some financially troubled issuers, like Puerto Rico and Chicago, have been particularly hard hit. Debt from the Windy City, which was downgraded by Moody's Investors Service last month amid questions about its pension liabilities, now yield about 1.50 percentage points more than a municipal market benchmark, up from about one percentage point in early July, according to Dan Toboja, senior vice president in fixed-income trading at investment bank and broker-dealer B.C. Ziegler & Co. in Chicago. Higher yields indicate lower prices. Yields on investment-grade municipal bonds have risen to almost the same as similarly rated corporate bonds. That is a rare occurrence, considering municipal bonds have lower default rates and the interest is generally tax free. As of Tuesday, yields on corporate bonds were 3.37 percent and yields on municipal bonds were 3.33 percent, according to investment-grade indexes from Barclays. Typically, municipal bonds yield about 25 percent less than corporate bonds. Debt prices in general have weakened since May. The Federal Reserve has discussed slowing its easy-money policies as the economy improves, prompting long-term bond yields to increase.

A Michigan county’s decision to postpone a $53 million bond sale highlights the difficulty fiscally strapped issuers everywhere may face in the wake of Detroit’s record bankruptcy filing, the Wall Street Journal reported today. Portfolio managers say that they are more cautious now about buying bonds from local governments in Michigan and may demand higher interest rates to lend them cash. Genesee County, Mich., on Thursday shelved an offering after potential buyers wanted much higher yields than the county was willing to pay. But some also say their leeriness extends beyond the state’s borders, to other local governments struggling with their finances in the wake of the recession. One key test comes in the coming week, when Puerto Rico’s electric and power authority plans to sell about $600 million in debt. The deal is the first from an issuer in the commonwealth this year as the island continues to struggle with a sluggish economy and a high unemployment rate.