Detroit council cold to state proposal on finances

Reuters News
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Posted: Mar 13, 2012 3:58 PM
Detroit council cold to state proposal on finances

By Karen Pierog and John D. Stoll

DETROIT (Reuters) - Governor Rick Snyder continued his push for a consent agreement to save Detroit from the financial abyss, presenting city officials and a state-appointed review board with a draft on Tuesday.

The document would keep the mayor and city council in power but create a nine-member financial advisory board that would have considerable oversight of Detroit's finances, including approval of its budget and debt structures.

The mayor, who would have limited power as the city's emergency manager, and council would also have to agree to and promise to take various steps in the agreement.

The draft agreement, dated March 12, envisions a broad restructuring of Detroit's government that would cut workers, outsource some services, modify taxes, and potentially sell assets. The oversight board would have final approval of any changes in collective bargaining pacts.

If city officials fail to comply with the consent agreement, the state could cut off revenue-sharing funds or appoint an outside emergency manager to run the city, the draft said.

Snyder spokeswoman Geralyn Lasher said if the proposed consent agreement fails to win support, the review team that Snyder assembled in December will continue towards a March 26 deadline for recommending whether or not Detroit needs an emergency manager, who would essentially run the city in lieu of its elected officials.

"An emergency manager is not what the governor wants to see happen," she added.

Lasher said the state was still operating under the assumption Detroit will run out of money in April or May, hurting its ability to deliver basic services.

"The focus has to be to make sure people get paid and when (residents) call 911, the police actually come," she said.

Detroit's long-term liabilities are estimated to top $12 billion, while the city's annual budget is around $3.1 billion. With the U.S. auto industry's contraction, the city of 714,000 has faced hard times and lost 25 percent of its population between 2000 and 2010.

Detroit's city council members were not all open to an idea of a consent agreement.

"This is not something I would agree to," James Tate, a member of the nine-person city council, said prior to a morning session of the council. "The most important to me is to assure the city retain control of its own future," he said.

But Tate said financial crisis is nothing new for Detroit.

"Time is not on our side. Time was not on our side two years ago. Time was not on our side five years ago," he said.

During Tuesday's city council meeting, various union officials - who have been asked to agree to a new round of cost concessions to help stanch cash outflows - ripped the consent agreement. Some called it a blatant power grab by state officials, while others pointed the finger at Mayor Dave Bing for moving too slowly.

Charles Pugh, president of the council, said his concern is that the mayor and city council still have a voice in Detroit's finances. He said he was also told the agreement will contain some degree of state funding for the city on the order of $100 million. A state official confirmed the deal would include a financing arrangement in excess of $100 million.

JoAnn Watson, another member of the city council, said the consent agreement is illegal, repeating a common complaint she has made about the state allegedly withholding $220 million in income taxes owed to Detroit.

(Reporting by John Stoll in Detroit and Karen Pierog in Chicago; Additional reporting by Andrew Stern in Chicago; Editing by Gary Crosse and James Dalgleish)