DETROIT (Reuters) - The U.S. judge managing Detroit’s bankruptcy on Friday gave the city the go-ahead to move forward with a financing plan to mend broken street lights.
Judge Steven Rhodes put off a decision on the matter last week after he was made aware of a potential conflict of interest centered around law firm Miller Canfield, which represents Detroit on certain bankruptcy matters as well as the Public Lighting Authority, created by a bill passed by the Michigan Legislature late last year.
The city and the authority did not see the dual representation as a conflict, but the authority said in a brief filed with the court this week that another firm, The Allen Law Group, was its primary legal counsel. Miller Canfield, it said, only represents the lighting authority on bond issues.
Detroit’s plan is to use $12.5 million in annual utility tax revenue to back $153 million of bonds that will be issued by the Public Lighting Authority through a Michigan agency to finance improvements to the city’s dilapidated public lighting infrastructure.
Kevyn Orr, the city’s emergency manager who filed the historic bankruptcy in July, has said one of his top priorities is to improve Detroit city services. About 40 percent of street lights in the city do not work.
The authority also plans to secure a short-term $60 million loan before the bonds are sold.
Some Detroit bond holders, bond insurers, unions and retirees objected to the transaction, arguing that the deal will leave the city with less cash to pay its creditors.
Rhodes on Tuesday formally declared Detroit bankrupt.
Reporting by Joseph Lichterman; Editing by Mohammad Zargham