DETROIT, Jan. 17 (UPI) -- A federal judge warned Detroit to stop making hurried and unwise financial decisions, rejecting a payoff of two major banks as too expensive.
Judge Steven Rhodes said "no" to a $165 million agreement to pay off Bank of America Merrill Lynch and UBS to end obligations on interest rate-swap contracts that were costing the city tens of millions of dollars each year, the New York Times reported Friday.
The deal endorsed by the city's state-appointed emergency manager, Kevyn Orr, was meant to free up casino tax money the city uses to cover its obligations on the contracts, but Judge Rhodes said $165 million was "just too much money."
The plan was more involved. Orr wanted to use the casino tax revenue as collateral for a $285 million loan it is trying to secure from Barclays.
The $285 million, the Detroit Free Press said, was intended to pay off Bank of America Merrill Lynch and UBS with $120 million left over to put cash in the city's accounts, so it could pay its workers.
Detroit, otherwise, will soon run out of cash, the Times reported.
Rhodes rejected the $165 million portion of the agreement, but said Detroit could borrow the $120 million, a deal that is now up in the air, due to the lack of the collateral.
Rhodes also said the $120 million could only be spent if it was in compliance with laws that stipulate how casino tax money can be used. But Rhodes said the $165 million was not even close. "If it were close, the court would approve it. But it's not close," he said.
The judge's tone was scolding.
"The court ... will not participate in or permit the city to perpetuate the very kind of hasty and imprudent financial decision-making that led to the" original deal, a $230 million settlement that Rhodes rejected earlier, the Times reported.