Judge Allows Detroit to Keep Casino Tax Revenue
by Joel R. Glucksman on October 8, 2013
Detroit will be allowed to continue accessing casino tax revenue during its bankruptcy proceedings while negotiations with creditors relating to these revenues take place, a bankruptcy court has ruled.
U.S. Bankruptcy Judge Steven Rhodes authorized the struggling city to take in the casino tax revenue - which amounts to roughly $11 million each month - despite objections from bond insurer Syncora Guarantee Inc., which tried to block Detroit from using the funds. Detroit collects roughly $180 million annually from three of its casinos, Reuters reports. Of these funds, nearly $15 million is deposited each month into accounts managed by U.S. Bank to meet collateral requirements. The financial institution also sets aside $4 million each month for quarterly payments to swap counterparties, which leaves Detroit with the remaining $11 million.
However, Syncora insured the swaps as well as a portion of the Detroit pension debt associated with these transactions, and lobbied to block the city from gaining access to the casino revenue. Rhodes ruled that Syncora does not have a lien on the funds and could therefore not inhibit the city from using them, Reuters reports.
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