(Reuters) – Detroit is poised to default on about $641 million of its general obligation bonds on Tuesday, an event that is likely to spur a legal challenge over Detroit's decision to take tax money earmarked for bond payments and apply it instead to city needs.
About $411 million of the bonds targeted for default were subject to voter approval and raise money through property taxes, called millages.
A default on bonds that had been considered secured obligations could give rise to a claim that it is a violation of Michigan's constitution, which prohibits diverting revenue from tax millages to alternative purposes.
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