Detroit under review for emergency financial manager

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DETROIT – Just 24 hours after a Michigan state representative’s recall effort of Detroit Mayor Dave Bing went into motion, a review began that will likely lead to an emergency financial manager being appointed to the city. State Treasurer Andy Dillon said the review of the city’s finances would begin next week.

“There’s been a further deterioration of finances since I last met with the city,” Dillon told the Detroit News after meeting with Bing and Detroit City Council members. “We have to move more quickly than we currently are moving to resolve this.”

While Public Act 4, the emergency manager law instituted by Michigan Gov. Rick Snyder, was repealed on Nov. 6, this review will be under Public Act 72 – the state’s original emergency financial manager statute. A determination would be made in 30 days after the start of the review.

The state has been waiting on Detroit to approve parts of the consent agreement it entered into in April that would to free up $30 million to the city. These elements, which include legal and consulting contracts, have been held up by weeks of political posturing by Bing and the Council.

“My Administration has had discussions with the State regarding an Emergency Financial Manager previously,” Bing said in a statement. “Until the State makes a final determination, I will continue to implement my restructuring plan on behalf of the citizens of Detroit.”

Bing said Detroit has enough money to make it through December but sees a potential $84 million shortfall by the end of next fiscal year. Bing said that even if the state sends the $30 million, layoffs of city workers – which Bing said last week would start on Jan. 1 – will still be necessary.

Councilman Gary Brown told the Detroit News that state officials are worried that the city is heading toward Chapter 9 bankruptcy if something is not done to curtail the out of control spending. Brown, a former deputy police chief, has been one of the few open supporters of the consent agreement.

“I think that [an emergency manager] is certainly better than the option of bankruptcy, but I prefer to work through the issues under the consent agreement the state signed with the city,” Brown said. “I still feel there was time to implement the necessary restructuring in order to stop the cash burn if we are willing to make the tough political decisions necessary to downsize the workforce to restructure. It’s a better option than bankruptcy, but not an option I’m recommending.”

During Wednesday’s council meeting, councilwoman JoAnn Watson – one of the biggest opponents of any aid from the state – demanded that President Obama “bring home the bacon” to Detroit in exchange for the city voting in overwhelming numbers for his re-election. While it is not unprecedented for the federal government to help cities, there are no indications of any federal aid coming to Detroit.

“Our people in an overwhelming way supported the re-election of this president and there ought to be a quid pro quo and you ought to exercise leadership on that,” Watson said. “Of course, not just that, but why not?

“After the election of Jimmy Carter, the honorable Coleman Alexander Young went to Washington, D.C. He came home with some bacon. That’s what you do.”

With time running out, in order to avoid an emergency financial manager or bankruptcy, Bing and the City Council will have to end the power struggle and negotiate on the reforms in the consent agreement. Brown said he is not optimistic that things can be settled due to the unsettled atmosphere in city government.

“I’m not optimistic in this time frame the culture of city government will change to the point that they are willing to make the tough political decisions to keep us out of harm’s way,” Brown said. “The important thing is the citizens get the service their tax dollars are paying for.

“Detroiters deserve lights on and the police to show up on time. That’s the objective here. Not who gets it done, but that it in fact gets done.”

Follow Jay Scott Smith on Twitter @JayScottSmith