- Associated Press - Wednesday, June 13, 2012

MASON, Mich. (AP) — A lawsuit that threatened a delicate financial deal between debt-ridden Detroit and the state of Michigan was thrown out Wednesday after a lawyer for Mayor Dave Bing intervened and said the city’s top attorney had no authority to challenge the agreement.

The decision by an Ingham County judge was the latest turn in a strange dispute involving Detroit’s elected leaders and the head of the city’s law office, Krystal Crittendon, who said she could act independently and didn’t have to obey Mr. Bing’s plea to ax the lawsuit.

Michael Hodge, a lawyer in private practice, asked JudgeWilliam Collette to dismiss the case on behalf of the mayor’s office.

The judge said he had never seen a case “where the corporation counsel acts outside the mayor’s authority. … This is such an obvious issue.”

Dave Bing is the mayor,” Judge Collette said.

Gov. Rick Snyder and the city agreed earlier this year to stricter oversight of Detroit’s finances to avoid the appointment of an emergency manager who would have sweeping powers. Detroit has a newly hired chief financial officer and soon will have a nine-member board to keep an eye on spending. New labor agreements must be in place by mid-July.

Ms. Crittendon filed a lawsuit 90 miles away from Detroit in Ingham County, the home of state government, claiming the city can’t enter into a deal with the state to fix its finances because the state owes Detroit $220 million in past revenue sharing and other money from overdue water bills and parking tickets.

State officials denied the allegations and had warned Detroit that the lawsuit would jeopardize millions of dollars in current state aid held in escrow if it wasn’t dropped. Mr. Bing said this week that “without that, we’re dead.”

Ahead of the court hearing, bond-rating agencies downgraded Detroit because of the lawsuit.

“There is a fiscal emergency in the city,” Mr. Hodge told the judge.

Detroit’s budget deficit is more than $200 million, and long-term structural debt is pegged at just over $13 billion. Hundreds of city workers face layoffs, while some city services likely will be cut back.

Mr. Bing and Mr. Snyder hailed the judge’s decision to dismiss the case.

Judge Collette’s ruling “means that my administration can get back to dealing with the important issues facing our city,” Mr. Bing told reporters in Detroit on Wednesday. “This legal challenge has been an unfortunate distraction, but now it’s time for the city to move forward.”

Mr. Bing said he spoke Wednesday with state officials about releasing the revenue sharing that will help the city pay short-term bills, including payroll. He was concerned city workers might not get paid after this week without those funds.

Mr. Snyder’s office said in a statement that the governor is “gratified” by Judge Collette’s decision and that it “allows state and city to continue working together collaboratively to help address the fiscal challenges and crisis in Detroit.”

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