July 6 Litigation continued to swirl around
Detroit's fiscal pact with Michigan this week, potentially
jeopardizing a key bond sale to raise money for the city's
State officials had planned on generating $137 million for
Detroit by selling a bond issue ahead of a June 27 deadline,
which was extended this week into August.
Detroit newspapers reported on Friday that the city's top
lawyer sought to revive her challenge to the validity of the
financial stability agreement by asking the judge who dismissed
her complaint last month to reconsider his ruling.
Michigan Judge William Collette on June 13 found Detroit
Corporation Counsel Krystal Crittendon lacked standing to bring
the complaint over the April deal that gave Michigan oversight
over Detroit's sinking finances. His court clerk said no motion
for reconsideration had been received by Friday afternoon and
Crittendon did not immediately respond to a request for comment.
But, with the clock ticking for the long-term bond sale to
raise much-needed money for the city, Michigan wants the legal
challenges to stop.
"Without assurance the city will not lodge future legal
challenges to the financial stability agreement between the
state and the city of Detroit, the Department of Treasury
believes it will be difficult to complete a refinancing
transaction," said state treasury spokesman Caleb Buhs on
Michigan officials announced earlier this week that they won
a deadline extension to Aug. 15 for the transaction that will
replace $80 million of interim debt sold in March for Detroit.
The state had hoped to complete the second bond sale by the end
of June, but those plans were derailed by Crittendon's lawsuit
and the lack of her required statement that the bond sale can
The delay led to a standoff with the state last month that
threatened to drain Detroit of cash and cause it to default on a
pension bond payment. That in turn led to a round of credit
rating downgrades of city debt.
If the long-term bonds are not sold, Detroit risks losing
state revenue sharing money that will be intercepted by the bond
trustee to pay off the $80 million of debt. And the city would
not get the revenue boost from the long-term debt sale that will
restructure some of its outstanding bonds and issue new ones.
Detroit Mayor Dave Bing, who has sought but not obtained
Crittendon's dismissal, said on Friday her latest move puts the
financing at risk, making it harder to stabilize the city.
"This lawsuit does not fix a street light, does not put
buses in service, and does not put more police officers on the
street," Bing said in a statement.
Meanwhile this week, a new lawsuit was filed in state court
by Detroit residents that challenges the validity of the
financial stability agreement on the same grounds as
Crittendon's complaint - because of money the state allegedly
owes the city.
Still another lawsuit that surfaced this week was filed in
state court by a union activist against the Detroit financial
oversight board created under the fiscal agreement, claiming it
violated the Michigan Open Meetings Act by closing discussions
on collective bargaining matters to the public.
A population plunge and sinking revenue have left Detroit
with a $260 million cumulative budget deficit and a huge $7.9
billion long-term debt burden that includes city bonds, employee
pensions and retiree healthcare.