By: J. Ellsworth Summers and Scott St. Amand
Earlier this month the Sixth Circuit Court of Appeals ruled that the appeal of Syncora Guarantee Inc. must be heard by the lower federal district court before the bankruptcy court may conduct its trial on the city’s proposed Chapter 9 restructuring plan, which is scheduled to begin on August 14 th . Syncora, a municipal bond insurer and one of Detroit’s many creditors, petitioned the Sixth Circuit to order the federal district court to reconsider its appeal to stop Detroit from using tax revenue from casinos rather than preserving the revenue so as not to deplete the bankruptcy estate. Bankruptcy Judge Steven Rhodes ruled in August that casino revenue is city property and therefore subject to the automatic stay.
At $15 million a month, casino taxes are the city’s single best stream of revenue.
Although the appeal was filed eight months ago, the federal district court judge balked and failed to make a ruling. Instead, the district court judge issued an order in April freezing the casino-tax appeal until the Sixth Circuit ruled on a separate appeal regarding Detroit’s eligibility for municipal bankruptcy. Syncora then filed a petition for mandamus, essentially asking the appellate court to order the lower district court to issue a ruling.