A fiscal emergency exists in Detroit, the General Motors Co. home town where officials can’t reverse a slide that created a $326.6 million budget gap, according to a report that clears the way for a state takeover.
“It doesn’t have to be adversarial,” state Treasurer Andy Dillon said today at a press briefing about the report’s conclusions. “Detroit is fixable and brighter days are ahead.”
A fiscal crisis grips Michigan’s most-populous city, according to the report, ordered by Governor Rick Snyder. The conclusion lets the first-term Republican name an emergency manager to take control of Detroit’s finances, a move that may spur a political backlash. He can also seek to modify and enforce an April agreement, crafted to avert a takeover. That deal envisioned spending cuts and concessions from city workers.
The governor won’t make a decision for “a week or two,” according to Sara Wurfel, a spokeswoman. Detroit would be the sixth city in the state to be put under an emergency manager, if he takes that step.
“I am not surprised by the findings of the state’s financial review team,” Mayor Dave Bing said in a statement. “My administration will stay focused on the initiatives that most directly impact the citizens of Detroit: public safety, public lighting, transportation, recreation and neighborhood blight removal.”
Resources Needed
An emergency manager, if appointed, “is going to need resources -- particularly in the form of cash and additional staff,” Bing said.
Snyder probably has to call for a state takeover, said Doug Bernstein, a lawyer specializing in commercial restructuring at Plunkett Cooney PC in Bloomfield Hills, Michigan. He said the challenge is to find someone for the job willing to take on a temporary role that will be met with hostility in the city.
“The risk is they have to just settle for somebody, or they may have to overpay for somebody,” Bernstein said. “Maybe there’s someone who is capable and doesn’t need the job but wants to do some good for the city.”
Snyder has said he has been interviewing candidates for the post in anticipation of the report’s conclusions.
Mounting Shortfall
The city is on track to have a cash shortfall of more than $100 million by June, according to the report. Had it not borrowed to help cover earlier deficits, Detroit would have had an accumulated funding gap of $936.8 million by June of last year, the review team said. They said the city has amassed more than $14 billion in debt and long-term liabilities for pensions and post-employment benefits
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