Detroit Lawyer's Suit On Budget Accord Dismissed By Judge
By Margaret Cronin Fisk and Steve Raphael - Jun 13, 2012 10:52 AM ET
A Michigan judge dismissed a lawsuit seeking to void Detroit’s agreement on a state plan to resolve the city’s budget crisis, removing an obstacle to the deal.
Krystal Crittendon, Detroit’s corporation counsel, filed the lawsuit this month, asking a court to find that the city wasn’t able to enter into the financial-stability consent agreement with the state because Michigan owes Detroit money, including $224 million in revenue-sharing.
Ingham County Circuit Court Judge William Collette in Mason, Michigan, dismissed the lawsuit today, finding Crittendon didn’t have the right to bring it. Such lawsuits must be brought by officials such as mayors or city councils, he said.
“It’s an obvious issue,” Collette said at a hearing today. “People have to learn to live with this and move ahead.”
Detroit officials reached an agreement with the state in April to empower an oversight board to review spending cuts and efforts to force concessions from municipal unions. Detroit, Michigan’s largest city, was facing a $265 million deficit.
Michigan officials deny any default to the city and asked the court to dismiss the complaint. Detroit Mayor Dave Bing also opposed Crittendon’s lawsuit and asked her to withdraw it. His office filed a motion to intervene in the case yesterday, asking the court to dismiss it.
Fitch Ratings cited the lawsuit in reducing Detroit’s debt rating further into junk status. Fitch cut by two steps to CCC from B about $511 million in unlimited tax general obligation bonds. Fitch also reduced $453 million limited tax general obligation bonds two steps to CC from B-.
The agreement between the state and city came after Michigan Governor Rick Snyderappointed a financial review board to determine whether Detroit needed an emergency manager. The state treasurer had earlier made a finding of “probable financial stress” for Detroit, which gave Snyder the right to appoint the board.
Crittendon challenged the legal validity of the agreement in her lawsuit.
The case is City of Detroit v. State of Michigan, 12-66-MK, Court of Claims, State of Michigan.
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