In a letter to Michigan Governor Snyder, the industry trade association SIFMA argued that the pledge of taxing power ought to make UTGO bonds "first budget obligations" backed by an obligation to raise property taxes to levels necessary to repay principal and interest:
The SIFMA letter distinguished the city's obligations with respect to UTGO bonds from those associated with certificates of participation which, according to SIMFA, are not backed by a full faith and credit pledge.
Finally, SIFMA argued that treating UTGO bonds on par with the City's outstanding COPs could have a destabilizing effect on the municipal market as a whole, with Michigan municipalities particularly at risk.
Precedent respecting whether Detroit can use Chapter 9 and/or tax cap legislation to treat UTGO bonds as unsecured, and on a pari passu basis with other unsecured obligations, is thin.
UTGO bondholders who can make arguments under the theory adopted in the Jefferson County case, and/or those holding bonds containing a pledge to raise taxes notwithstanding tax caps, or other similar legislation, may have stronger claims of priority under theories advanced in cases such as Flushing and Quirk, compared to issuances without such language.
31, 2013); Order to Certain Parties to Appear for Continued Mediation on UTGO Matters, In re City of Detroit, Mich.