DETROIT – The city of Detroit could face potential bankruptcy by next Spring if significant cuts are not made. Mayor Dave Bing is set to address the city’s long-mounting financial crisis this evening.
“Mayor Bing inherited a city in fiscal, operational, and ethical crisis,” Mayoral spokesman Dan Lijana said. “Rather than continuing business as usual and sweeping problems under the rug, Mayor Bing has taken on the tough issues and had an honest dialogue with Detroit about our fiscal challenges.”
An audit by Ernst & Young, which was ordered by the city and paid for with taxpayer money, showed that the city’s finances are so slim that even laying off 2,200 employees would delay insolvency only until July. The audit, that led Bing to suggest he would consider becoming emergency financial manager if asked to do so by Gov. Rick Snyder, also showed that the city is in jeopardy of running out of money as soon as next April if significant cuts are not made.
“It’s a tough situation that we’re in because we haven’t seen revenues pick up the way we anticipated, and we’ve seen additional people leave the city,” Detroit City Councilman James Tate said. “That leaves us with a reduced tax base. I hope (Bing) comes out and gives the full story and that’s what people need to know. There’s no hiding the fact the city is in a financial crisis now.”
The audit shows the city is being crippled by plummeting revenue from income and property taxes, a drop in state aid and higher costs on payroll and pensions. The audit suggests the city could have only about $23 million in cash available by the end of the fiscal year on June 30.
The report also pointed out that revenue-generating ideas included in the city’s budget this year — such as increasing fees on booting cars and more aggressive income tax collections — have yet to start up, leaving the city with a $63 million budget gap.
City Council members are so concerned about the budget issue that they canceled their annual six-week Christmas recess. The recess, which was scheduled to run from Nov. 23 to Jan. 8, will now be spent trying to fix this budget crisis.
“My fear is that it may be permanent recess,” Councilman Kwame Kenyatta told the Detroit News. “For this body to be perceived to be out on vacation while this city is sinking into the Detroit River is a real consideration for me. At some point we should stop playing with this thing and say this city is in serious trouble, and we ought to act like it.”
Councilwoman Brenda Jones expressed a similar sentiment. She feels that for too long the city has tried to carry on as if there are no problems and it has led to this situation.
“Too many people don’t know what the real deal is. People don’t know what financial straits this city is really in,” Councilwoman Brenda Jones said. “I don’t think anything is more important than the budget problems. We need to let the public know we are addressing the problems.”