In the second of three necessary steps, the Michigan Local Emergency Financial Assistance Loan Board Tuesday approved a $120 million loan for the city of Detroit from Barclay’s of London. The funds, backed by the city’s income tax revenue as collateral, will be used for city operations including blight removal, public safety and computer system upgrades.
The city council previously approved the loan. In the final step, U.S. Bankruptcy Judge Steven Rhodes will consider it, and a hearing is set for April 2. On Monday, Rhodes ordered the city to provide additional information about how it would spend the $120 million from Barclay’s.
The state Emergency Loan Board has representatives from the Treasury Department, the Department of Technology, Management and Budget, and the Department of Licensing and Regulatory Affairs.
Borrowing approved in this deal represents renegotiated terms of an earlier plan between the city and the London-based bank that fell through. Under the earlier proposal, which wasn’t supported by emergency manager Kevyn Orr, Detroit had hoped to borrow $350 million by pledging its casino tax revenue.
Under the new plan, Detroit no longer is putting up its casino revenue as collateral, an issue that undercut the prior deal. It also avoids $230 million in borrowing to pay off a controversial transaction brokered by ex-Mayor Kwame Kilpatrick to cover pension debt.