Detroit is facing the very real possibility that it will become insolvent. The possible positive-to-negative day is Friday.
According to Detroit Mayor Dave Bing, the only hope to stave off insolvency and a state take-over is to have a lawsuit challenging a consent agreement with the state to be withdrawn. That agreement provided bond revenue to the city, that would keep the city operational. However, the lawsuit makes the $45 million balance of an $80 million revenue stream off-limits. Without that money, the city might not make payroll on Friday.
The city’s lead attorney filed the suit, and despite pressure from the Mayor, she has the sole authority to file or withdraw lawsuits. The position is independent. Her contention in the suit is that the city cannot enter any agreements with another entity that is in default with the city. Because the state already owes the city more than $100 million, the consent agreement was invalid.
From the Detroit Free Press:
Detroit will run out of cash a week from today if a lawsuit challenging the validity of the city’s consent agreement with the state is not withdrawn, city officials said this morning.
Jack Martin, the city’s new chief financial officer, said the city will be broke by June 15 but should be able to make payroll for its employees. He said the city will be operating in a deficit situation if the state withholds payments on a portion of the $80 million in bond money needed to help keep the city afloat.
Read the full article here.