DETROIT – For the third time this year, the city of Detroit is staring at potential bankruptcy as legal wrangling over “control” has caused $10 million in state aid to be withheld from the city. The continued issues between the city and state of Michigan have led the state legislature to talk about numerous options for the city, including potentially dissolving the city altogether.
“If we have to, that is one idea we have to look at,” State Sen. Rick Jones said. Jones, a Republican representing Michigan’s 24th district, said that dissolution would be a drastic step but everything is “on the table” including Chapter 9 Bankruptcy.
“We really have to look at everything that is on the table,” Jones said. “Again, if this goes to federal bankruptcy, every employee down there will suffer, the city will suffer and the vultures will come in and take the jewels of Detroit and they will be gone.”
Michigan Gov. Rick Snyder also acknowledged that anything was possible in terms of how to handle Detroit’s financial situation, even though dissolving the city would be a last resort. Last week, the Detroit City Council rejected a contract with the law firm Miller Canfield that would’ve allowed the firm to help handle the city’s financial recovery plan.
The rejection was apart of an ongoing power struggle between the state, city council, and Detroit mayor Dave Bing, which could ultimately lead to Detroit becoming the largest American city to ever file for bankruptcy. Bing has already threatened city employees with temporary layoffs starting in January, as the city stands to be short by $30 million.
“In order to compensate for the deficit, the city will begin to institute unpaid furloughs and other cost-saving actions, effective January 1, 2013,” Bing said on Nov. 21. “We will ensure that revenue-generating departments are not impacted by these cost-cutting measures. These actions are necessary to keep the City from falling into further financial distress.”
Some city residents and advocates insist that the city does not need the state’s help and that it is the state of Michigan that needs to answer to Detroit. To others, including former city communications director Karen Dumas, the city needs to face the reality that it no longer has any leverage in the matter.
“[Bankruptcy] would be unfortunate and unlikely for it to happen only because of the impact of it doing so and the impact that it would have on the state and the surrounding areas,” said Dumas, who served under Bing as well as former Mayor Kwame Kilpatrick. “On the other hand, it would also erase some of the legacy costs and debt that the city has been burdened by because people are unwilling to recognize the damage those things have caused.
“We’re still, as a city, still managing some rules and union contracts that, much like the 1967 conversation, [are] extremely outdated. We have too many people in this city doing too little for too few.”
Dumas, who currently runs a public relations company in Detroit, described the city as being inefficiently run and said has many officials she feels are invested in maintaining the status quo. She also said the city needs to be made more operationally efficient instead of waiting on incremental aid from the state and federal government.