DETROIT – The fiscal crisis plaguing Detroit is now in the hands of Michigan’s governor after a state-appointed review team determined the city was in a financial emergency with “no satisfactory plan” to resolve it.
Republican Gov. Rick Snyder has 30 days to decide if Detroit needs an emergency manager to take charge of its finances and spending, and come up with a new plan to get the city out of its financial mess.
After spending weeks looking at the city’s books, the independent review team released a report Tuesday saying Detroit’s deficit could have reached $900 million last fiscal year had it not borrowed enormous amounts of money. The city’s long-term liabilities, including underfunded pensions, are more than $14 billion.
The report also said the city’s bureaucratic structure makes it difficult to solve the financial problems.
Some fiscal experts believe the city’s only way out may be municipal bankruptcy, but state Treasurer Andy Dillon said answers could be found if the city and state work together.
“It’s our hope at the state level that this is a partnership. It doesn’t have to be adversarial,” said Dillon, a member of the review team. “A lot of the ingredients for the turnaround of the city are in place. Now we just need to execute. I do believe strongly that Detroit is fixable.”
But over the last nine months, that relationship has been strained. Detroit Mayor Dave Bing and the nine-member City Council entered into a consent agreement with Snyder in April that allowed some state oversight and help with Detroit’s finances – short of cash infusions – in return for certain fiscal reforms. However, the city often missed deadlines and benchmarks.
The ongoing cash crisis has threatened to leave the city, which has a current budget deficit of $327 million, without money to pay its workers or other bills. Dillon said the city has been running deficits since 2005 and masking over them with long-term borrowing.
“I stand with Detroiters and other stakeholders that the pace of change has been frustratingly slow,” said Gary Brown, City Council president pro-tem. “Without a doubt we need the support and accountability that a state of Michigan partnership offers.”
Under state law, Snyder has 30 days following the review team’s finding to decide for himself whether there’s a financial emergency. Bing would have 10 days to request a hearing. The first-term governor could then revoke his decision or appoint an emergency manager.
The emergency manager would be responsible for overseeing all of the city’s spending. Bing and the City Council would keep their jobs, but the manager would decide all financial matters. Only the manager would have the power to authorize the city to take the bankruptcy route.
