A lawsuit that seeks to block the use of public school funds for the Detroit Pistons’ move from the suburbs to the Little Caesars Arena under construction downtown could “kill” the project and trigger a municipal bond default, the city’s attorney said Monday.
Community activist Robert Davis’ lawsuit asks a federal judge to stop the capture of funds from millages for Detroit schools and county parks to pay for a $34.5 million headquarters and practice facility for the Pistons.
The millage funds are being used for a different purpose than voters intended, depriving Davis and co-plaintiff Etta Wilcoxon of their right to vote, according to the lawsuit filed June 1 in U.S. District Court.
Public dollars are already being captured through tax increment financing to service $250 million in bonds issued for Little Caesars Arena, the future home of Ilitch Holdings’ Detroit Red Wings. The project is financed with a mix of public and private funds and has nearly doubled in cost from initial projections.
“This is probably the most egregious example of the denial of the right to vote,” Andrew Paterson, the attorney representing Davis and Wilcoxon, said during a Monday hearing before U.S. District Judge Mark Goldsmith.
Tom Gores, the billionaire investor and owner of the NBA team, announced in November that the Pistons would leave their suburban home, the Palace of Auburn Hills, and join the Red Wings at the downtown arena.
The arena was already under construction at the time of the announcement and is being modified to accommodate the basketball team. The Detroit City Council is set to vote Tuesday on the additional $34.5 million in bonds for the Pistons.
Update: Late Monday evening, U.S. District Judge Mark Goldsmith denied a request for a court order to block the Detroit Downtown Development Authority from using taxpayer funds to relocate the Pistons to Detroit.
Litigation Comes As Pistons Await City, NBA Votes
Detroit, which exited an $18-billion bankruptcy in 2014, would face a “cascading effect of horrible outcomes” if a court injunction halted the tax capture and caused a default on the $250 million bond, David Fink, an attorney for the Downtown Development Authority, said Monday.
While the Ilitch family is paying for the majority of the arena, it's owned by the Downtown Development Authority, which is considered a component of the city and material to its finances.
The Pistons have asked the NBA to approve the team’s move back to Detroit — where it last played in 1977 — at the association’s July 11 meeting.
“There’s no extra time here. It’s got to be talked about at this July meeting,” Fink said. The Pistons are scheduled to play their first preseason game at Little Caesars Arena in October, the attorney said.
The existence of pending litigation surrounding the deal could prevent bonds from being issued, Fink said.
Goldsmith asked Paterson whether prior case law exists that supports a federal claim by a voter when funds OK’ed in the voting booth have allegedly been misused.
“I think it’s unusual. But that doesn’t mean it doesn’t involve the right of the citizens of Detroit to vote,” Paterson told the judge.
Goldsmith said he would issue a written opinion on Davis and Wilcoxon’s request for a temporary restraining order.
Photo via Wikimedia: Little Caesars Arena under construction in downtown Detroit.
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