Detroit City Council Approves Consent Agreement

The Detroit City Council and the state of Michigan reached an agreement Wednesday to restructure the city's finances.
by | April 5, 2012
 

DETROIT — The long-awaited fiscal restructuring of Detroit is set to begin — whether some in the broken city like it or not.

The city council and the state of Michigan reached an agreement Wednesday that comes with stiff requirements that still could land Detroit under state control. But it also creates a partnership that promises better services for the city's suffering residents.

The document was approved by a financial review team and a fractured City Council. Once signed by Michigan Gov. Rick Snyder and Mayor Dave Bing, the deal goes into effect.

"Make no mistake about it, the work begins today," Council President Pro Tem Gary Brown told reporters after casting his vote in favor of the agreement. "Now we have oversight with real teeth that will insure that city services get reshaped."

The former manufacturing giant has been floundering financially for years, partly due to the ups and downs of Detroit's automakers and a declining tax base as people and businesses left the city. Past leaders also failed to curtail spending and cut jobs to keep pace with losses in revenue.

The question of who should lead the way in fixing Detroit's finances has divided the city for months, with some saying help from the state is the only answer to Detroit's $200 million budget deficit and $13.2 billion in structural debt.

Others, including many of the city's unionized workers, fear Detroit is welcoming in a powerful partner that will take away self-rule and force strict wage and benefits concessions on city employees.

"This city is on track to run out of cash," said Councilwoman Saunteel Jenkins, who also voted for the deal. "Of course, the easy thing to do was vote 'no.' I felt it was in the best interest of the city and the more than 700,000 people who live here for us to work with the state."

Four on the council voted against the deadline-beating deal that avoids the embarrassment of Michigan's governor appointing a financial overseer for City Hall.

Snyder had given the city until Thursday to approve the agreement or risk the appointment of an emergency manager to take over.

Although many of the details are unclear, the agreement lets Bing and the council keep authority over the city's finances and budget. However, they would be required to renegotiate recently ratified union concessions and share decision-making with a newly hired project manager and chief financial officer. A nine-member board would monitor the city's fiscal restructuring.

The Detroit case is the highest-profile yet involving a controversial year-old Michigan law that gives the state more power to intervene in financially troubled cities and school systems. Emergency managers have the power to toss out union contracts and strip locally elected leaders of authority. A petition drive aimed at overturning the Michigan law is trying to qualify for the November ballot.

When Bing took office in 2009, the city's deficit topped $300 million. He has since cut about 2,000 jobs through layoffs and by not filling open positions.

The deal reached Wednesday compels Detroit to meet deadlines in putting together city budgets and to accurately update revenue predictions. City departments are expected to be slimmed down or consolidated if savings can be made. Work currently performed by some unionized employees could be outsourced to save money.

Missed deadlines and failure to comply with those and other terms of the agreement could be constituted as a breach of the deal and lead to the state's withholding of revenue sharing and preventing the city from entering the capital markets to sell bonds.

Copyright 2012 The Associated Press.

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