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Michigan court ruling allows takeover of Flint

CHICAGO, Aug 21 (Reuters) - A state-appointed financial manager was expected to be on the job in Flint, Michigan, Wednesday after the Michigan Court of Appeals threw out a lower court ruling that blocked a state takeover of the beleaguered city's finances, state officials said Wednesday.

Terry Stanton, a spokesman for the Michigan Treasurer's office, said Ed Kurtz, who was tapped on July 8 to be Flint's financial manager, was expected to start his work on Wednesday.

Under a takeover, Flint's mayor and city council would still exist, but Kurtz would control all of the city's money, including payroll and contract approval.

A ruling Tuesday by the appeals court concluded that Ingham County Circuit Court Judge James Giddings' decision last month to halt the takeover violated the Michigan constitution's separation of powers. The appeals court sent the matter back to the lower court for review and ordered a ruling to be issued within 14 days.

Melvin McWilliams, an attorney representing the Flint City Council, which challenged the legality of the takeover, was not immediately available for comment.

Gov. John Engler welcomed the appeals court ruling, saying that Gidding's action "served only to further worsen Flint's financial crisis." The judge had issued a temporary restraining order against the takeover on July 11 before ruling on July 18 that the city was not given enough opportunity to present evidence and offer witness testimony against the takeover.

The governor concluded in May that Flint faced a financial emergency and lacked a satisfactory plan to solve it. That led the state's Local Emergency Financial Assistance Loan Board on July 8 to appoint Kurtz, a recently retired president and chief executive officer of the Baker College system, as the city's financial manager.

Flint, the birthplace of the world's largest automaker General Motors Corp. , saw its property tax revenues drop in 1999, when GM closed its Buick City assembly center. A state review found the city's deficit in the approximately $84 million general fund budget doubled since fiscal 2000 to $26.6 million in fiscal 2001.

Engler has opted for financial managers in recent years for two Detroit-area cities -- Hamtramck and Highland Park. With a population of about 125,000, Flint would be the biggest Michigan city with a financial manager.

Meanwhile, the governor said Wednesday he will fight a recently filed challenge to a state takeover of the financially troubled Inkster Public Schools. The state earlier this month appointed a financial manager for that suburban Detroit district.