Detroit mayor offers budget, but emergency manager flexes power

Reuters News
Posted: Apr 12, 2013 4:11 PM
Detroit mayor offers budget, but emergency manager flexes power

By Steve Neavling

DETROIT (Reuters) - Detroit Mayor Dave Bing proposed a $1 billion budget on Friday that allows the deficit to balloon to $380 million, despite a financial crisis that led the state to appoint Emergency Manager Kevyn Orr to take over the city's purse strings.

At nearly the same time on Friday, Orr issued an order underscoring that it is the emergency manager, not city officials, who has final say on appropriations, contracts and other substantive matters. Any such acts "will not be valid or effective unless and until approved by the Emergency Manager or designee in writing," Orr wrote in his Order No. 3.

The order does allow the city to take all actions necessary to deliver city services. Orr has final say over the city budget, and the state law creating the emergency manager position requires Orr to deliver a financial and operating plan for Detroit by May 9.

Bing's proposal to council represents the first major action by the mayor since Orr took his position on March 25. It also is a sign of his intent to play a significant role in setting the city's political and budgetary course, in apparent hope Orr will focus chiefly on reducing the city's $14 billion in long-term debt.

"He is not here to run the city day-to-day," Bing said at a news conference. "That is not his strength. His expertise is long-term debt."

Orr's spokesman, Bill Nowling, said the emergency manager is acting carefully in hopes the city's elected officials can meet the annual budget demands and continue to keep the budgeting process transparent.

"It serves no purpose to come in with a heavy hand," Nowling said of Orr, a bankruptcy lawyer and turnaround expert. "It's important for the elected council and mayor to weigh in. That is going to position us to work on restructuring the long-term problems."

Those structural problems include pension and healthcare costs. Healthcare payments to current and former employees make up a third of the city's general fund budget. The $380 million deficit is up 16 percent from last year's $327 million in red ink.

Bing's 2013-14 spending plan, which by law must be adopted by June 30 when the prior spending plan expires, calls for continued mandatory furlough days - one unpaid day every two weeks for city workers - and a $4 million reduction in the city council's $11.2 million budget. But it avoided any sweeping cuts to spending on public safety, transportation, blight removal, public lighting and parks and recreation.

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"I don't think we can cut anything else and still be functional," Bing said.

City officials alerted the firefighters union on Thursday that the city plans to impose a new contract on the Detroit Fire Fighters Association without negotiating with the union.

Bing's budget also proposes revenue increases, including jumps ranging from 15 to 50 percent on various city fees.

Bing said he is optimistic that he and the council will continue to play an important role in the city's future and its delivery of services.

"If we do what we're supposed to do, I can't see the emergency manager making significant changes," he said.

Nowling said Orr plans to pore over the spending plan in the coming weeks before making any decisions.

(Reporting by David Greising; editing by Matthew Lewis)