July 3 (Reuters) – A new lawsuit is challenging the validity
of Detroit’s financial pact with Michigan because of money
allegedly owed to the city by the state.
The lawsuit, which seeks an injunction that the agreement is
void and unenforceable, is similar to litigation brought by
Detroit’s top lawyer that was dismissed last month by a state
judge in Ingham County.
An attorney for three Detroit residents who filed the latest
lawsuit in Wayne County Circuit Court against Mayor Dave Bing
and the city council, said on Tuesday that the financial
stability agreement the mayor agreed to in April abdicated “a
large portion of his responsibility to govern to the state.”
Herbert A. Sanders, the attorney, also said the city was
prohibited from entering into the agreement because the state
owes the city money. The lawsuit cites about $230 million
ranging from unpaid state revenue sharing to parking fines.
“Everyone knows you can’t get hired by the city or get a
contract with the city if you or your company owes the city
money,” Sanders said in a statement. “This situation is no
different.”
Detroit Corporation Counsel Krystal Crittendon’s lawsuit
led to a standoff with Michigan officials that threatened to
drain Detroit of cash and cause it to default on a pension bond
payment. The dismissal of the case on the grounds Crittendon
lacked standing to bring it diffused the crisis. Crittendon told
Reuters on Tuesday she has not yet decided whether to appeal the
ruling.
Naomi Patton, Bing’s spokeswoman, declined to comment on the
new lawsuit.
The fear of ongoing challenges to the agreement by the city
has stymied plans by the state to raise $137 million for
Detroit’s ailing budget through a long-term bond sale.
Detroit on Tuesday reached an agreement to extend the
repayment on an interim $80 million bond issue, allowing the
city to collect the bulk of the $28.5 million in revenue sharing
due it next week. Some $4.9 million of the total will be used to
begin paying off the bonds, the state’s Department of the
Treasury said.
If there had been no agreement, the entire $28.5 million
would have been intercepted to begin repaying the bonds.
A spokesman for Michigan’s Treasury Department, Terry
Stanton, said the latest lawsuit challenging the validity of the
financial stability agreement had no merit.
