Fitch Ratings issued a press release on the situation with Michigan’s Emergency Manager law (right now the court is weighing whether to put on the fall ballot a measure to repeal the current version of the emergency manager law, under which Detroit’s consent agreement with the state). Ratings agencies have been vocal about Detroit’s troubles, and instrumental in affirming the State’s position that Detroit is in irrevocable fiscal trouble.

As Detroit’s fiscal stability agreement has several features that rely on the existence of PA 4, most notably the ability to suspend collective bargaining, the repeal of PA4 could weaken or nullify the agreement. This may have an adverse effect on the city’s ability to continue the reforms already begun under the agreement and therefore stabilize and improve its credit quality.

We also believe the prospects for financial stability among entities assisted by emergency managers now, or those that might need them in the future, are unclear.

Fitch will continue to monitor this evolving situation and report back when more details and analysis will become available.

via FitchResearch.