Appeals court clears way for Detroit's pact

Reuters News
Posted: Mar 24, 2012 10:58 AM
Appeals court clears way for Detroit's pact

DETROIT (Reuters) - The court of Appeals in Michigan late on Friday cleared the way for a governor-appointed team, facing a deadline on Monday, to come up with a consent deal to keep the city of Detroit financially afloat.

The court reversed an order from earlier in the week that questioned whether the team could meet in private and barred it from issuing a recommendation until a hearing set for March 29.

The review team, appointed by Governor Rick Snyder, has until Monday to issue recommendations to repair Detroit's crumbling finances, the result of a steep population drop, sinking revenue and a huge debt load.

Once the recommendations are issued, Snyder has 10 days to act. The 10-member team is slated to meet Monday afternoon.

If a consent agreement is not reached, the state could cut off revenue-sharing funds or appoint an outside emergency manager to run Detroit.

A spokeswoman for Snyder said the administration was "thankful" the appeals court had allowed the review team to work toward a resolution of the financial crisis.

"Resolving this crisis in a timely matter is crucial for the residents of Detroit," Geralyn Lasher, Snyder's spokeswoman, said in a statement.

Snyder, who has said repeatedly that he does not favor the option of appointing an emergency manager for Detroit, was to return on Saturday from a trade mission to Europe.

Detroit and Michigan state officials continued negotiations on Saturday, according to a city spokesman, who declined to say when they might reach a deal.

On Friday, roughly half of Detroit's unionized public employees accepted pay cuts and other concessions to save $68 million a year, actions that a spokesman for Snyder said did not go far enough to address the city's long- and short-term troubles.

The agreements announced on Friday did not include Detroit's police and fire unions, which also had tentative deals.

Detroit, Michigan's biggest city, has faced hard times for decades and is expected to run out of cash within months as a result of a huge debt load, a steep population drop and sinking revenue.

The base of much of the U.S.-based auto industry, "Motor City" was once home to nearly 1.9 million people in the 1950s, and now has a population of about 714,000.

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

Both Fitch Ratings and Moody's Investor's Service slashed the city's ratings and said more cuts were possible as the city and the state of Michigan struggle to agree on a plan to avoid the city running out of cash.

(Reporting By Ben Klayman, Tiziana Barghini and David Bailey; Editing by Vicki Allen)