(Reuters) - Michigan's Wayne County, home of Detroit, has asked the state for a fiscal emergency declaration to deal with a chronic budget deficit, spokesmen for the county and state confirmed on Thursday.
Wayne County Executive Warren Evans late on Wednesday formally asked Michigan Treasurer Nick Khouri to initiate a review process that would lead to a consent agreement between the county and the state.
The action comes as the county was scheduled to sell nearly $187 million of general obligation, limited-tax notes through Bank of America Merrill Lynch on Thursday . Underwriters and financial advisors for the deal were not immediately available to comment on the status of the note sale.
In a letter to Khouri, Evans said the county's general fund budget deficit was projected to jump to $171.4 million in fiscal 2019 from $9.9 million this year due to declining tax revenue and escalating personnel costs. In addition, the county's finances are sagging under an $870 million unfunded pension liability and its credit ratings have fallen into the junk level.
Michigan Treasury spokesman Terry Stanton said the county's request was under consideration.
In its offering document for the note sale, Wayne County warned potential investors it could be headed to federal bankruptcy court if it did not implement its plan to address chronic budget deficits by curbing pension and healthcare benefits and cutting wages. That could lead to an appointment of an emergency manager, who could recommend a Chapter 9 municipal bankruptcy filing, the document said.
Detroit exited the biggest-ever municipal bankruptcy last year, shedding about $7 billion of its $18 billion of debt and obligations.
(Reporting by Karen Pierog; Editing by Lisa Von Ahn)