Jan 18 (Reuters) - The Michigan Supreme Court on Friday rejected a challenge to the state’s emergency manager law that deals with financially strapped cities and school districts.
The ruling may lift any prospective legal cloud over action that Michigan Governor Rick Snyder could take in the near future to use the law to appoint a manager for Detroit. An emergency manager could recommend the city file for bankruptcy.
The Supreme Court let stand a ruling by a Michigan Appeals Court that allowed the law on emergency managers stay in place.
“We are not persuaded that the questions presented should be reviewed by this court,” the Supreme Court said in its ruling.
A review team appointed by Snyder in December to review Detroit’s finances could recommend the appointment of an emergency financial manager. The team’s work continues with no particular timetable for its conclusion, Terry Stanton, a spokesman for the Michigan Treasury Department, said on Friday.
The state’s law on emergency managers, known as Public Act 72, was resurrected last by Michigan officials when a law that had replaced it, Public Act 4, was placed on the ballot and repealed by Michigan voters in November.
Both laws allowed for Michigan to intervene in financially troubled local governments and to appoint emergency managers.
After Public Act 4 was suspended in August, the state used Public Act 72 to reappoint emergency managers running cities and schools districts.
A lawsuit by a community activist, Robert Davis, sought to oust the emergency manager running the Detroit Public Schools on the argument that Public Act 72 no longer existed.
In November, a Michigan Appeals Court panel ruled that when voters rejected Public Act 4, they also rejected the legislative repeal of Public Act 72, allowing that measure to remain in effect.
Davis had appealed to overturn that ruling. Andrew Paterson, Davis’ attorney, was not immediately available for comment.
Meanwhile, Snyder last month signed into law a bill passed by the Republican-controlled legislature that gives local governments options for dealing with fiscal stress. That law, which will replace Public Act 72 and will keep in place existing emergency managers and consent agreements, does not take effect until March.
Under the new law, governments will choose between Chapter 9 municipal bankruptcy if the move is approved by the governor, an emergency manager, arbitration with a neutral party, or a consent agreement laying out terms for fixing the government’s finances.