State officials started playing hardball with the city of Detroit Thursday.
The state treasurer's office warned that if the city law department chief does not drop her lawsuit challenging the consent agreement that gives the state significant power over Detroit’s finances, the city could lose $80 million in state aid.
The suit needs to be dropped by next week. If it isn't, the Bing administration acknowledged Friday that the city could go broke within a week.
The warning from the state about the lawsuit came in a letter from Deputy state Treasurer Thomas Saxton to Jack Martin, the city’s new chief financial officer.
The $80 million is state revenue sharing to the city, money that was used essentially as collateral for interim refinancing of bonds issued in March to help the city avoid running out of cash.
Krystal Crittendon, Detroit’s corporation counsel, filed the lawsuit in Ingham County Circuit Court, charging that the consent agreement was “void and unenforceable.” She argues Michigan owes the city $224 million in revenue sharing and other debts for unpaid water bills and parking tickets and, under the city charter, Detroit can’t contract with entities in default to the city. Crittendon said the city’s new charter gives her broad authority to challenge what she sees as violations of the charter.
While the mayor appoints the head of the law department, under the new charter it takes two-thirds of the votes of city council to fire her without cause.
Saxton’s letter said Crittendon’s lawsuit has no merit.
