Finance

Michigan's $5M Cap on Restructuring Aid Stuns Detroit Leaders

November 14, 2013
 

Detroit City Council members and Mayor Dave Bing were stunned to learn Wednesday that the state is putting a $5-million cap on what it will pay to help restructure city government, even as contracts for law firms and consultants exceed $62 million.

The revelation led to a volley of recriminations after emergency manager Kevyn Orr’s appointed finance director, John Naglick, told City Council members about the cap.

Bing told the Free Press he was appalled to learn of the state’s $5-million spending cap for the city as it now awaits permission to enter municipal bankruptcy, claiming debts and long-term obligations of $18 billion.

City contracts with restructuring consultants and other documents indicate the state will cover 50% of certain costs. But there is no written mention of a $5-million cap — including in the contract for one of the city’s top restructuring consultants, Conway MacKenzie of Birmingham, which was amended in June to $19.3 million from an initial $4.2 million in January.

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