Michigan to appeal latest legal setback for Detroit

Reuters News

4/3/2012 12:18:46 PM - Reuters News

DETROIT (Reuters) - A Michigan court ruling that put the brakes on the work of state-appointed team charged with recommending a fix for Detroit's fiscal woes will be appealed as soon as Tuesday, a spokesman for Governor Rick Snyder said on Tuesday.

Ingham County Circuit Court Judge Joyce Draganchuk late Monday issued a temporary restraining order that led to the cancellation of the review team's meeting scheduled for Tuesday morning.

Thursday is the deadline for the governor to act on the team's recommendations for Detroit.

"We are extremely disturbed by this latest ruling from the Ingham County Circuit Court," said a Snyder spokesman, Terry Stanton. "The biggest question is, will an appeal be addressed before the April 5th deadline for the governor to make a determination as required by statute?"

The Ingham County judge's order is just the latest wrinkle in a battle over how to best save Detroit, which is expected to run out of cash in May.

Without an approved consent agreement, Snyder would be forced to make a decision based on the team's March 26 recommendations that Michigan's biggest city is in severe financial stress but lacks a consent agreement, Stanton said.

Snyder would then have to decide whether or not to declare a financial emergency for Detroit, he added. A financial emergency, which the city could contest in a hearing before the Michigan Financial Authority, could lead to the appointment of an emergency manager who would essentially run the city for the duration of the emergency.

Legal challenges have repeatedly slowed the work of elected officials and their staff members as they try to craft a comprehensive restructuring plan for Detroit. Detroit's deepening financial crisis emerged last fall when auditors revealed the city would run short of cash.

Draganchuk scheduled a hearing on the complaint, that the review team's charter ended last month under state law, for April 11, almost a week after the governor's deadline, attorney Andrew Patterson said. Paterson represents community activist Robert Davis, who has been a key challenger to the state review teams.

The state review team was expected to take up a consent agreement that is currently being deliberated by Detroit's city council. Since receiving a draft of the agreement last week, the council has listened to hours of testimony from citizens, union officials and community advocates encouraging elected officials to not cooperate with the state.

On Tuesday, outspoken union activist Gregory Murray told the council to exercise "do nothing democracy" in hopes that legal objections to Snyder's actions would put a stop to the state of Michigan's effort to intervene in Detroit's finances.

Proponents of Snyder's plan have said that the city will no longer be able to pay its bills without help from the state.

During morning deliberations by the city council, President Pro Tem Gary Brown said the council needs to find a solution to financial issues because "bankruptcy is not an option." He said Detroit would spend several years in court and a filing would render the city unable to pay vendors and employees.

"You will exacerbate the problem," Brown said.

The city has won concessions out of some of its 48 unions in an effort to avoid a state takeover via an emergency manager. Bing's administration, however, has recommended abandoning those concessions in order to seek another round of negotiations and agreements that would meet Snyder's demands.

But a coalition of unions is asking a U.S. District Court to prohibit the review team Snyder appointed in December and city officials from taking action on a consent agreement that would impair tentative labor agreements some of the unions ratified last month. A hearing on a request for a temporary restraining order is scheduled for later on Tuesday.

(Reporting By Karen Pierog and John D. Stoll; Editing by Padraic Cassidy)