LANSING, Mich. — Michigan officials said Wednesday that they've found "probable financial stress" in Detroit, moving the state's largest city one step closer to the possible appointment of an emergency manager.
State Treasurer Andy Dillon sent a letter to Gov. Rick Snyder Wednesday alerting him to the finding, which recommends Snyder appoint a team to dig deeper into the city's financial situation. There's no deadline for Snyder to appoint the financial review team, but once appointed, it must report its findings to the governor within 60 days.
After meeting with Snyder Wednesday morning, Detroit Mayor Dave Bing said in a statement that the city was taking steps to solve its financial problems without the appointment of an emergency manager, although he'll continue working with the review process.
"There is nothing in the findings released today that we or the state were not previously aware of," Bing said.
Auditors have said Detroit may run out of money in April, and the financially struggling city delayed paying some of its vendors and contractors last week so it could cover payroll. Snyder has said he'd prefer that city officials enter into an agreement to fix the financial problems on their own, but he has left open the possibility of appointing an emergency manager if the review team signals one is needed.
Bing said in his statement that he believes the crisis can be solved through his cost savings plan, which seeks to save $102 million this fiscal year and $258 million in the 2012-13 fiscal year.
"Key components of my plan include structural reforms in health care and pensions, work rule changes and wage reductions," Bing said. "We will continue to negotiate with union leadership with a goal of forging an agreement soon."
The preliminary review showed the city faces a nearly $200 million general fund deficit for 2011 and took on more than $600 million in new debt between 2005 and the present to keep the city afloat. It also noted the city has over $12 billion in long-term liabilities for pension and other costs and that the city's deficit elimination plans and budget proposals so far have proven to be "unrealistic."
"City officials are either incapable or unwilling to manage ... (the city's) finances," Dillon said in the letter to Snyder, citing the report's findings. "Projected expenditure reductions rely heavily on union concessions, which have not historically materialized."
Dillon said he and the governor remain hopeful that Detroit officials will come up with a way out of the financial mess on their own. He cited the new spirit of cooperation between the mayor, city council and city unions to take the steps needed to avoid a financial meltdown.
"There is real progress," Dillon said during a conference call with reporters. "Everyone is willing to look at every possible solution."
He added he expects that the formal review process "will begin in earnest" early next month and run in tandem with Detroit officials' efforts to find their own solution.
"We're very focused on the date when we think they run short of cash, since that affects our timeline," the state treasurer said. "We're watching that very, very closely."
If the new review finds the city is under severe financial stress, city officials might be able to stave off a financial manager by adopting and agreeing to strictly follow a consent decree righting Detroit's finances. Such an agreement is likely to include painful remedies for elected officials, city workers and city services, but would avoid handing control of the city to an emergency manager.
Dillon expects to send Snyder this week a list of possible review team appointees that will include residents of Detroit, a majority black city that already has an emergency manager overseeing its public schools.
A statewide petition drive is under way to let voters weigh in on the emergency manager law next November. If the drive is successful, the status of the law may be in limbo until the election.
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