03/01/2012 12:07 pm ET

Inkster Financial Review Board Approves Consent Agreement

The City of Inkster may be able to avoid a full state takeover, if the governor decides to follow a state review board's Wednesday recommendation to work out a consent agreement for the financially struggling city.

The recommendation from Inkster's financial review team is expected to reach Gov. Rick Snyder's desk Thursday, according to state Treasury spokesman Terry Stanton.

Under Public Act 4, the Michigan law authorizing emergency managers, a financial review board is allowed to work out an agreement with a city or school district's chief administrative officer. A consent agreement would grant Inkster Mayor Hilliard Hampton more executive power and could help local officials avoid a state-appointed emergency manager, as long as they follow negotiated guidelines.

The governor appointed Inkster's review team in December after a preliminary look at the city's books found "probable financial stress" marked by recurring fund deficits and cash shortfalls. Reports have indicated the city faces a multi-million-dollar deficit.

Inkster is also eligible for a loan of up to $3 million from the state, but those funds would be separate from a consent agreement and would have to be approved by Michigan's Local Emergency Financial Assistance Loan Board.

The idea of a consent agreement has been floated for Detroit, which is also undergoing a state financial review that could lead to an emergency manager. Snyder stated in late January that he feels a consent agreement would be the "best answer" to resolving the city's fiscal woes.

However, a financial review team's recommendation is just that -- a recommendation. Under Public Act 4, the final decision-making power rests with the governor, and Snyder could still choose to appoint an emergency manager for Inkster.

But cracks are appearing in the legitimacy of Public Act 4's authority, as opponents of the law ramp up their efforts against it.

The consent agreement recommendation from the Inkster financial review team came the same day a grassroots group working to repeal the law delivered 50 boxes of signed petitions to the Secretary of State in Lansing.

If state elections officials certify at least 161,305 of the 226,634 signatures, the law will be suspended until a statewide referendum in November. If voters reject Public Act 4, Michigan would then revert to an earlier law allowing for emergency financial managers with reduced powers.

Wednesday also marked a partial victory for Detroit Public Schools teachers and other DPS union members over the district's emergency manager, Roy Roberts. The unions had sued Roberts for bypassing a collective bargaining agreement in order to cut wages and benefits -- a power afforded the emergency manager under Public Act 4.

But the district settled the case, indicating it didn't believe it could win a full legal fight. A judge awarded union members a lump-sum payment equal to 2.5 percent of their 2011-12 earnings.