Steven Church

As creditors prepare to vote on a plan to end Detroits $18 billion bankruptcy, the city still needs help from state lawmakers to pay its obligations while avoiding a fire sale of its fine art collection.

U.S. Bankruptcy Judge Steven Rhodes approved the citys disclosure statement and a plain language explanation of how pension and retiree health benefits for current and former city employees would change under the plan to shrink the citys $18 billion in debt.

The board of directors of the Detroit Retired City Employees Association voted to support the citys proposal that reduces pension and retiree health-care benefits, the mediators said.

The California Public Employees Retirement System said a ruling by a judge in Detroit that federal bankruptcy law takes precedence over state law may threaten the soundness of public pension systems as a whole.

The announcement came as the judge handling the $18 billion bankruptcy case urged Detroit to resolve disputes with suburbs that rely on it for water and sewer services.

Yesterday, a committee of retirees announced that it had reached a deal with the city. Shortly after that, Detroit filed a new debt-cutting proposal, describing agreements with the two pension funds that operate the retirement plans for 30,000 active and retired municipal workers.

The city reached agreements two days ago with its two pension systems, after settling with some bondholders last week.

Under a deal with the citys pension systems on cuts to retirees monthly payments, the two sides agreed to cap the amount overpaid retirees must repay at 20 percent of what they received.