Kaffer: Drama at City Hall is Overshadowing Crucial Detroit Bond Sale
Underneath the circus tent, the drama is playing out at Detroit city hall. Problem is, the tent is collapsing.
Nancy Kaffer of Crain's Detroit Business has written a thoughtful and insightful piece on how the drama over the firing of Detroit Corporation Council Krystal Crittendon is overshawdowing a very pressing issue. She writes:
The city’s financial future hinges on a bond sale set for next week, and right now, it’s not clear if that sale is going to happen.
In short, the city borrowed about $80 million this spring on a short-term basis, with the understanding that a June sale of long-term bonds would refinance the short-term borrowing.
Earlier this month, Crittendon attempted to void the consent agreement between the city and the state, saying that the city’s charter bars it from entering into a contract with any entity that’s in default to it, and that the state is in default to the city.
Had she been successful in court (an Ingham County judge dismissed her case in about 20 minutes), all contracts between the city and the state would have been void, including the arrangement that allows the city to securitize its bond sales with revenue sharing payments. (The state withholds the city’s debt payments from its revenue sharing before revenue sharing payments are made to the city – sort of like having your paycheck garnished).