Mayor: Lawsuit Could Cause Detroit to Go Broke

Comments: Comments Are Disabled  | Leave A Comment
  • advertisement
  • DETROIT (AP) — Detroit's mayor warned Monday that the city could go broke if its top lawyer refuses to drop her lawsuit challenging a deal with Michigan officials that seeks to rescue the city from financial collapse.

    The most recent clash between Mayor Dave Bing and the city's Corporation Counsel Krystal Crittendon underscores how precarious Detroit's situation remains, even after officials signed the deal in April letting the state take a more active role in city fiscal restructuring without the embarrassment of appointing an overseer to do the job.

    Although Crittendon's lawsuit targets that so-called consent agreement, Bing and state officials say it also could imperil a separate contract allowing the city to sell bonds in order to pay short-term bills and make payroll for its approximately 10,000 employees. Bing told the City Council that $80 million in precious revenue sharing for the city could be withheld.

    The legal conflict could scare off potential buyers of those bonds, Bing and state officials warn. If $137 million worth of bonds are not sold by June 27, the bank could intercept the revenue sharing money that was used to secure the loan.

    "Without that, we're dead," Bing said. "We get into this lawsuit, and we get into this litigation, nobody knows how this is going to play out or how long it's going to take. In the meantime, we have no money to run the city."

    Crittendon claims the consent agreement approved in April between Bing and Gov. Rick Snyder is null and void because Detroit's charter prohibits the city from entering into contracts where at least one side owes the other money. She and some on the council have said for months that the state owes Detroit $220 million in past revenue sharing.

    Snyder has said the state doesn't owe the city the money. Crittendon didn't immediately return a call Monday from The Associated Press.

    Detroit's new charter, approved last year by voters, gives the city's corporation counsel the authority to investigate violations of the document — meaning Bing and the Council can't force her to drop the suit. It takes six votes from the nine-member council to remove her.

    If the lawsuit is not dropped by early this week, current revenue sharing could be withheld for payments on bonds, Deputy Treasurer Thomas Saxton wrote Thursday in a letter to Jack Martin, the city's chief financial officer. Saxton said the lawsuit challenging the consent agreement could cause concern among third parties interested in purchasing the bonds.

    Detroit is due $25.1 million this month, $25.1 million in August, $27.7 million in October and $4.6 million in December, Saxton said.

    Not only is Detroit's accumulated budget deficit more than $200 million, the city's long-term structural debt tops $13 billion.

    Without the revenue sharing, Detroit would have a negative cash flow starting Friday and there "would be chaos," Council President Pro Tem Gary Brown told The Associated Press Monday. "After Friday, we won't be able to make payroll in two weeks."

    Crittendon's lawsuit goes before a judge Wednesday. The City Council could vote Tuesday on a resolution asking her to drop it.

    Bing asked Crittendon Saturday to drop the lawsuit and she said "no," Brown said.

    "If I make the resolution tomorrow, I don't think there'll be the support for it," Brown said. "Everybody is in a stare down. It's like, who is going to blink?"

     

    Tags:

    • More Related Content

    Follow

    Get every new post delivered to your Inbox.

    Join 1,971 other followers