Detroit May Run Out of Cash In A Week If Consent Lawsuit Not Withdrawn
City officials: Detroit will go broke in a week if consent deal lawsuit isn't withdrawn
The city of Detroit will run out of cash a week from today if a lawsuit challenging the validity of a consent agreement is not withdrawn, city officials said this morning.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 it 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.
The battle ultimately could lead to an emergency manager if state officials deem the city to be in violation of the consent agreement that gives the state significant control over Detroit’s finances.
Deputy Treasurer Thomas Saxton told the city Thursday that the lawsuit against the consent agreement could force the state to hold back from the city $80 million in revenue sharing that was used, essentially, as collateral for interim refinancing of bonds issued in March so Detroit would not run out of cash.
Detroit has already used $35 million of the $80 million. The money is in an escrow account, but based on the letter, city officials will not be able to draw down any more of the money, Martin said.
“If our city runs out of money, there is no bigger crisis that we would have in our city,” Detroit Mayor Dave Bing said this morning, adding that his frustration level is “off the charts.”
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