Detroit to get $20 million from state after meeting reform goals

Reuters News
Posted: Jan 25, 2013 6:15 PM
Detroit to get $20 million from state after meeting reform goals

(Reuters) - Cash-strapped Detroit will get $20 million from the state of Michigan after substantially meeting goals aimed at restructuring the city's sagging finances, city and state officials said on Friday.

Detroit Mayor Dave Bing said an agreement was reached with Michigan to release the money, which was raised in a bond issue last year, from an escrow account held by the state.

"The release of these funds will occur at my discretion," Bing added in a statement.

However, Terry Stanton, a spokesman for Michigan's Treasury Department, said while the city is substantially in compliance with conditions the state set with Bing in November, Michigan has not yet received a request for the money.

"If and when the city submits a draw request for funds, we would begin the process of sending the funds to the city," he said.

The city of about 700,000 has been battered by a steep decline in population, years of severe budget deficits and escalating employee costs.

Since November, a majority of the nine-member city council has gradually approved the series of goals or conditions, including the hiring of companies to work on reform, restructuring and legal matters, in an effort to stave off a state takeover of the city.

In December, the state released $10 million of the bond proceeds tied to the so-called milestone agreement after the council dropped its opposition to the hiring of law firm Miller Canfield to work on issues related to a 2012 consent agreement that gave the state some oversight of Detroit's finances.

Despite action by the city council, the state also launched a review last month of the city that could culminate in the appointment of an emergency financial manager, who could recommend Detroit file for bankruptcy.

In its ongoing effort to stave off a state takeover, the city council voted 6-3 on Friday to reduce the pay of non-union workers in Detroit's legislative and executive branches by 10 percent.

Mayor Bing, who had originally sought a 20 percent reduction through unpaid days off, said the lower percentage was "adequate at this time," with savings to the city's general fund estimated at about $500,000 a month.

"We anticipate that we will furlough approximately 1,250 non-union employees, with no disruption in city services," the mayor said in a statement.

Earlier this month, the council approved a one-year pension freeze and a higher share of healthcare costs for non-union workers as the city planned to negotiate similar cost-cutting actions with its labor unions.

(Reporting by Karen Pierog; editing by Dan Grebler, G Crosse)