Share this story
Close X
Switch to Desktop Site

Michigan set to step in as Detroit nears financial collapse

Next Previous

Page 2 of 3

About these ads

Treasury Department Spokesman Terry Stanton told reporters on Monday that Crittendon needs to withdraw her lawsuit because it will dissolve the consent agreement and the state will divert all remaining revenue-sharing payments that the city is due to pay off its $80 million debt.

“If the lawsuit is not withdrawn, the original bonds cannot be refinanced, which would lead to the intercept (not suspension) of revenue sharing monies,” Mr. Stanton said.

Mayor Bing insists he cannot control Crittendon under the rules of the city’s charter, which the state disputes. Bing described this latest chapter of Detroit’s fiscal crisis as a “game of roulette” and appealed to the city council Monday to vote against the lawsuit, but they refused.

City Council President Charles Pugh said the state would be “irresponsible” if it refused the city the payments, causing it to run out of cash. The city attorney’s “opinion does not prevent the state from living up to its responsibilities,” Mr. Pugh said.

Snyder avoided appointing an emergency manager to take control of Detroit’s finances following a state commission report earlier this year that showed a budget deficit reaching $200 million and a looming emptying of cash reserves. At that time, Moody’s Investors Services issued two separate downgrades of the city’s tax credit rating.

On Tuesday, Fitch Ratings said it downgraded several areas in the city's bonds in response to the uncertainty of the city's finances and the possibility it might not make payments to its pension certificates.

The governor insisted he wanted to work with the city through the consent agreement, which conceded budgetary power to city officials but allowed the state to play a more supervisory role through a chief financial officer tasked to usher the city along to meet fiduciary guidelines outlined in the agreement terms. Detroit has already used $35 million of the $80 million to help pay its bills since April.

Jack Martin, the city’s new chief financial officer, said the city will run out of money June 15 but could make payroll for employees.

Next Previous

Page:   1   |   2   |   3

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.