Bankruptcy Court to Consider Detroit Loan for Lights

DETROIT -- Detroit is expected to ask the judge overseeing the city’s bankruptcy case to safeguard a revenue source it wants to use to back debt to finance repairs to its notoriously broken down public lighting system.

The city had originally hoped to float $160 million of revenue bonds to finance upgrades to the lights, but has struggled to access the market amid the bankruptcy proceeding, Gary Brown, the city’s chief operating officer, said Friday in an interview at the Michigan Municipal League conference in downtown Detroit.

So it has settled for a roughly $60 million private placement with a bank in a deal that the state is helping work out, Brown said.

The transaction was set to close by the end of September, but hit a snag when the bankers said they wanted “clarification” from the federal court that the utility taxes backing the loan will be protected from the bankruptcy, he said.

Attorneys are hoping to get a hearing on the issue within the next two weeks, Brown said.

The plan calls for the city to tap $12.5 million a year in annual utility tax revenue.

City and state officials worked for years on the plan to create a new lighting authority that would issue its own debt backed by a revenue pledge separate from the city’s. Lights are fundamental to public safety and key to the city’s recovery, Brown said during his talk at the conference.

“The city of Detroit is dark,” he said. “We spend millions on consultants to get more officers out to the communities and they can’t see anything.”

The lighting plan was one of Mayor Dave Bing’s top priorities. In May, Detroit Emergency Manager Keyvn Orr issued an executive order approving funding for the Public Lighting Authority.

The order approved $1.8 million to start up the authority, created in December by state legislation.

The city will deposit $1.78 million a month into a trustee account for the rest of 2013, and in 2014 will collect and deposit an additional $1 million, according to the order. The money is to be used to for debt-service payments on bonds issued for capital improvements.

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