Detroit gives state powers to help rescue finances

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By COREY WILLIAMS and TIM MARTIN, Associated Press

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

A contentious and much-debated agreement with the state on fixing the city's finances comes with stiff requirements that still could land Detroit under state receivership if certain reporting timelines are late or unmet.

But it also creates a partnership that promises better services for the city's suffering residents.

The document was approved Wednesday by a financial review team and a fractured City Council. Once signed by 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 one of five votes in favor of the agreement. "Now we have oversight with real teeth that will insure that city services get reshaped."

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 and Snyder 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. It was not clear when Snyder and Bing will sign the document. Bing was readmitted to a hospital Wednesday as a precaution because of discomfort following surgery to correct a perforated colon.

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 City Council's vote ... represents a pivotal moment in Detroit's history," Deputy Mayor Kirk Lewis said in a statement. "It is time now to begin the monumental task of stabilizing Detroit's financial operations.

"The mayor and his administration worked with the City Council and the state to develop a consent agreement that we believe puts us on track to restructure our city financially and re-establish an infrastructure to make sure Detroit never faces these financial conditions again."

Snyder released a statement crediting the council for acting "responsibly to put Detroit on the path to financial stability."

"We all want Detroit to succeed," Snyder said. "... While the council's action is a positive step, there's no doubt that much work remains. The magnitude of the city's financial challenges means that many difficult decisions lie ahead."

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.

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.

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. At worst, the state Treasurer's office also could place the city in receivership.

The nine-member financial advisory board will monitor how Detroit manages its limited resources and report back to the state. It also will make recommendations to the mayor and help the city in preparing its 3-year budget.

"This is not a panacea. This is not going to be a quick fix," Council President Charles Pugh said. "We're going to have to do more cutting."

Pugh voted for the deal.

Still, it likely will be a matter of years before the changes to Detroit's financial and operational structure show results, state Treasurer Andy Dillon said Wednesday.

"I think it's a multiyear process," Dillon said. "I don't think it's two years. It's probably closer to five. It's going to take a long time. The city didn't get here overnight."

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