Detroit — A judge has denied a request for a court order to block the Detroit Downtown Development Authority from using taxpayer funds to relocate the Pistons to Detroit.
U.S. District Judge Mark Goldsmith’s decision released late Monday not to issue a preliminary injunction clears the way for the DDA to go before the Detroit City Council on Tuesday to get approval to issue $34.5 million in taxpayer-funded bonds to make modifications to Little Caesars Arena to allow the Pistons to play there this fall.
The council will take up the issue and can approve the bond request, refer the matter back to committee or postpone action on it.
During a 70-minute hearing Monday, Goldsmith heard oral arguments in a lawsuit in which two voters are seeking a temporary restraining order against the DDA to stop it from using tax money, intended for schools and parks, to support the Pistons’ move downtown.
Goldsmith repeatedly asked attorney Drew Paterson — who represents D. Etta Wilcoxon and Robert Davis, the two voters who want the issue put to a vote of the people — how the right-to-vote issue he raised in court was a violation of the U.S. Constitution and whether Paterson had any past court ruling that was analogous to the case he was bringing.
“You may have all kinds of violations of state law,” Goldsmith said. “To get into federal court, you have to prove a violation of the U.S. Constitution.”
Paterson said the case was a right-to-vote issue protected by the U.S. Constitution. He said the funds the DDA would capture, from a Detroit Public Schools millage and a Wayne County parks millage, couldn’t be used without a vote of the people.
“Public bodies refusing to call for an election are deliberately frustrating the electors,” Paterson said.
In his order Monday night, Goldsmith wrote: “Plaintiffs have not demonstrated that the right to vote guaranteed by the United States Constitution is somehow abridged by the violation of state laws regulating government financing that is subject to voter approval. This is especially true here, where the alleged misconduct only occurred after the votes had been, by all accounts, properly and fairly cast and counted.”
Paterson said the DDA is entitled to capture millage money but it didn’t announce until April and May which public funds it was taking to issue the bonds.
The lawsuit argues Detroit and Wayne County residents have a right to vote on the bonds, in August or November, before City Council members vote on the deal.
“We want you to enjoin the use of funds captured until they comply with the law,” Paterson told the judge.
David Fink, attorney for the DDA, said the case before Goldsmith is “of enormous magnitude” because of the impact on the city of Detroit and because it could have an impact on the state of Michigan.
Fink said Goldsmith did not need to issue the injunction to block the DDA from capturing the tax dollars because “It can be fixed... You can order the parties to move money around.”
Granting a preliminary injunction against the DDA would have caused “devastating financial harm to the city,” Fink said.
Fink told Goldsmith the DDA has been capturing taxes in the city since 1978 and that the arena costs aren’t being funded with additional DDA tax dollars until 2045.
“There is no mystery as to what is happening here,” Fink said. “Not a nickel of additional tax capture will occur this year or next.”
Goldsmith asked Fink if the council was still scheduled to hear from the DDA on Tuesday about the bonds and he said yes.
“This is the item we need passed so we can move forward,” Fink said.
In urging the judge to not issue the injunction and to rule in his favor on his motion to dismiss, Fink said any ruling against his client would cause more than a bump in the road.
“This is harm that can’t be undone. We want them here,” Fink said of the Pistons.
Last week, attorneys for the DDA and the Detroit Brownfield Redevelopment Authority asked Goldsmith to dismiss the lawsuit, alleging it could derail the project, prevent the team’s move to Detroit and cause “massive harm” to the city.
In another development in the case, Greg Campbell, chief financial officer of Palace Sports and Entertainment and the Detroit Pistons, alleges in a court affidavit filed late Friday the NBA will not vote on the proposed relocation of the Pistons from Auburn Hills to Detroit until “all material elements” of the move have been finalized.
The Pistons have requested the NBA’s Board of Governors vote on the move at its next quarterly meeting July 11.
“The current litigation creates significant uncertainty relating to the DDA’s ability to fulfill its commitments upon which the Pistons relied in determining to relocate to the city,” Campbell’s sworn statement says.
In the federal lawsuit against the DDA and DBRA, Wilcoxon and Davis contend the move by the Pistons from Auburn Hills to Detroit this fall should be stopped until city and Wayne County voters have a chance to decide whether taxpayer-backed bonds should be used as part of the deal.
“The loss of tax increment financing at this critical moment could upend the complex financial package supporting the Pistons’ move to Detroit, and the resulting changes could cause the Pistons to reverse their plans,” according to the city’s argument that were filed Thursday. “The loss of the Pistons would cost Detroit millions of dollars in tax revenue and would threaten the burgeoning growth of the City’s entertainment district.”
City attorney Darryl Bressack argued in the motion that the loss of the Pistons would cost Detroit millions of dollars in tax revenue and threaten the burgeoning growth of the city’s entertainment district.
An adverse ruling could cause a default on $250 million in outstanding DDA bonds, Bressack alleges. Because the DDA is a component unit of the city of Detroit, the consequences of default would be “devastating, threatening the ability of the City to issue debt or, if debt can be issued, to obtain favorable pricing in the capital markets.”
“A default on DDA’s debt would certainly increase the costs and could possibly derail the plan completely,” Bressack said.
The motion to dismiss was also filed on behalf of attorneys who represent Detroit City Council, who were added to the lawsuit in recent weeks.
The city’s lawyers want Goldsmith to dismiss the lawsuit because the litigants lack standing, fail to make claims under Michigan law and don’t prove a violation of federal voting rights, among other things.
So far, about 62 percent or nearly $539 million of the Little Caesars Arena project is from private financing and the rest — $324 million overall — is government financed.
The arena and other developments are estimated to cost a total of $862.9 million.
Staff Writer Mark Hicks contributed to this report.