(Reuters) - A Michigan judge has declined to revisit his June 13 dismissal of a lawsuit filed by Detroit's top lawyer challenging the validity of the city's fiscal pact with the state.
Judge William Collette issued an order on Tuesday denying the motion for reconsideration requested by Detroit Corporation Counsel Krystal Crittendon, according to his clerk. A spokeswoman for Michigan Attorney General Bill Schuette also confirmed on Wednesday that the order had been issued.
Litigation against the April financial stability agreement that gave Michigan oversight of Detroit's finances has threatened a bond sale aimed at raising $137 million in much-needed money for the city budget.
Last week, Michigan's treasury department said it was able to extend until August 15 a deadline for issuing the long-term bonds that will replace an $80 million interim borrowing.
However, Michigan officials have warned that future challenges by Detroit to the financial stability agreement could derail the long-term bond sale, forcing the use of the city's state revenue-sharing money to pay off the interim debt.
Detroit Mayor Dave Bing said the lawsuit was unnecessary and costly to the city.
"Corporation counsel's actions have cost the city money - as of June 27 the city's interest rate on its $80 million bond has increased from 2.8 percent to 6.25 percent, increasing the city's borrowing cost by an additional $10,000 per day - and further jeopardizing the city's revenue-sharing payments from the state," Bing said in a statement.
The state's plan to complete the bond sale by the end of June was stopped by the Crittendon lawsuit, which claimed Detroit could not legally enter into a contract with Michigan because the state owes the city more than $230 million. Michigan has denied the allegation.
The judge, Collette, dismissed the lawsuit, ruling that Crittendon lacked standing to bring it. Crittendon appeared on Wednesday before a closed session of the Detroit City Council, which is trying to clarify the ability of the corporation counsel to file lawsuits without authorization from the council or mayor. Crittendon was not available to speak to the media and has not responded to requests for comment from Reuters on whether she will seek to appeal Collette's dismissal of her case.
The financial stability agreement still faces a challenge filed by a group of residents. Also, a union activist filed a lawsuit claiming that the oversight board created under the agreement violated Michigan's Open Meeting Act when it met privately to discuss collective bargaining matters.
A population plunge and sinking revenue have left Detroit with a $260 million cumulative budget deficit and a huge $7.9 billion long-term debt burden that includes city bonds, employee pensions and retiree healthcare.
(Reporting by Karen Pierog, additional reporting by Karen Morgan in Detroit; Editing by Lisa Von Ahn and M.D. Golan)