Governor declares financial emergency in Detroit, calls it a "sad day"

In this Feb. 21, 2013 file photo, Michigan Gov. Rick Snyder discusses the effect of Detroit's drastic population loss over 60 years, which he says is the main reason for the city's financial woes during a news conference at his office in Detroit. / AP Photo/Carlos Osorio, File

DETROIT Gov. Rick Snyder declared a financial emergency in Detroit on Friday, pushing the city closer to having a state-appointed emergency manager control its finances.

Snyder told The Associated Press that his decision on whether to appoint an emergency manager will come after the city's 10-day appeals process, but that Detroit will be "on the path" to having the state oversee its books if he turns down any such appeal. Mayor Dave Bing's office already has been notified of a March 12 hearing date, Snyder said.

Snyder called it a "sad day" but also a day of "optimism and promise because it's time to start moving forward and solving these problems." The governor also said he already has a candidate in mind for the position, but declined Friday to release details.

Detroit faces a $327 million budget deficit, more than $14 billion in long-term debt and persistent cash flow issues. Friday's announcement was all but guaranteed after a review team reported to Snyder on Feb. 19 that Detroit was in a financial emergency and needed the state's help to emerge from it.

Bing said Thursday he has thought since taking office in 2009 that some kind of outside help is needed to address the city's finances.

"I'm more interested, instead of fighting Lansing, in working with them," the first-term mayor said.

Emergency managers have the power under state law to develop financial plans, renegotiate labor contracts, revise and approve budgets to help control spending, sell off city assets not restricted by charter and suspend the salaries of elected officials.

A review team first looked into Detroit's books in December 2011, but stopped short of declaring a financial emergency. The second team began to pore over the city's financial records this past December. That report said the accumulated deficit as of June 30, 2012, would have topped $900 million if Detroit leaders in recent years had not issued bonds to pay some bills.

The city's long-term liabilities — including underfunded pensions — now total more than $14 billion. And in recent months, Detroit has relied on bond money from an escrow account to meet its dwindling cash flow needs and to pay city workers. The review team also said that because of Detroit's cash deficit, the city would have had to either increase revenues or decrease expenditures — or both — by about $15 million per month beginning in January and running through March to "remain financially viable."

The team found that "no satisfactory plan exists to resolve a serious financial problem" in the city.

"The case is all about the numbers," Bing said Thursday. "Anybody who's been following the numbers in Detroit knows that the numbers aren't good and they're not going to change dramatically any time soon. There are things Lansing can do to help to get us out of this situation faster than we can do it by ourselves."

Detroit would be the sixth — and largest — city in Michigan to come under state oversight. Pontiac, Flint, Ecorse, Allen Park and Benton Harbor already have managers, as do public school districts in Detroit, Highland Park and Muskegon Heights.

CBS Detroit reports that council members are asking for a chance to present their own plan that they say, through additional city job cuts and tax collection, would result is a budget surplus of $3.5 million by the end of next year. They're also talking about possibly leasing some city assets, including City Airport.

Councilwoman JoAnn Watson specifically asked if the mayor would fight against the "right-wing agenda, not to help the city but to grab its assets."

[lsjogren]

Guirky:

You think Snyder gets any pleasure out of having to try to clean up the economic toxic waste dump the whack job Democrats created?

[wfw3536]

The Dems and Libs should take a bow for the way they ran Detroit into the ground. At the rate Obama is spending a trillion dollars a year we have to borrow our country will soon be facing some very serious debt problems like many of the European countries are at this time.

[ammo17]

should have done this 20 years ago we have the same problem in new jersey with the cities of trenton and camden.

[Jesus_to_ground_control]

Detroit has no soul.

[GTime68]

Detroit is simply out of "other people's money." A one-political-party rule in this city with no leadership just hasn't worked to the advantage of the people, has it?

[overthehill5]

Detroit is the place the Lord would start if he gave the Earth an enema.

[HarshestReality]

Classic line. I gotta remember that one.

[arthanyel]

The underlying fiscal crisis in Detroit is real. The Republican use of "emergency managers" to suspend the constitutional rights of their citizens is reprehensible.

Rick Snyder and the Republicans in the state houses have created this "emergency management" mechanism so they can take power away from duly elected officials and break contracts with impunity. That is wrong - wrong for Michigan, wrong for America. And everyone should stand against such back-door partisan politics suspending their rights.

Detroit may need to go bankrupt. Detroit may need to drastically re-negotiate contracts. And Detroit may need to raise taxes or eliminate what they think is necessary spending, but they can no longer afford. Any of these things may be required - but it is the lawful duty and responsibility of the elected offices in the CITY OF DETROIT to make those decisions, not a hand-picked sock puppet of the Republican Governor.

[qyeteye]

If your elected city officials are incapable of making those decisions - or have been in court and/or have served prison terms for doing just the opposite - WHAT THEN?

Exhibit A = Maybe there is a valid reason to NOT be doing the same thing over and over and expecting a different result. Particularly as lawful duty and responsibility was found lacking in practice and having bred the issues and problems to contend with now.

Incompetence and criminality usually means forfeiting rights to continue to do it.

Next...

[arthanyel]

QYETEYE - if your elected officials are not doing their job, you elect new officials. That's the way democracy works. Just because they aren't working the way YOU think they should doesn't give you (or Governor Snyder) the right to take away MY rights.

By your logic, Obama should disband Congress and assume "emergency manager control" as it is very clear THEY are incapable of making decisions, and it is pointless to do the same thing over and over and expect different results.

Would you support that? if not - you shouldn't support Snyder's usurpation of due process and democratic rule.

[techcnc]

From an Engineers POV: This is the tragic, but inevitable result of 40 years of Americans screwing themselves by buying foreign cars. The Big Three automakers gradually moved jobs out of the area to cut costs in order to compete with overseas workers getting $5.00 an hour, or lost them finally to overseas competition. Without good jobs, people don't want to live here. The tax base shrinks, living conditions decline, causing even more people to move out. A classic Vicious Circle. Perhaps unstoppable.
Just look at the cars being driven in Detroit: Hyundai, Suzuki, Honda, Kia, Lexus, Infinity. All Brand Names that did not exist in the Eighties. Just remember, we (as Americans) did this to ourselves. Justify all you want about poor quality, or free markets, or the best deals. The decline of American manufacturing will bring us all down eventually, and make China, Japan, and Korea the new world leaders.

[qyeteye]

There is a reason why people bought and buy these once imported cars many now assembled here in USA.

"Free Market" participants concluded Detroit cars were not measuring up in reliability and drained wallets from repair costs too often, were sometimes too big on the outside and too small on the inside, used too much fuel, were the equivalent of driving a living room instead of something responsively fun, etc.

Why didn't Detroit respond sooner? Instead the emphasis was placed on high-profit SUVs. It is only with a near death experience that a rebirth is happening (for a time).

CEOs / management were mostly about Wall Street driven quarterly profits and image - not thinking organically of smart transportation aligned with planet resource co-existence.

That's line of thought is just for tree huggers.

[bucolucas]

Factory workers at Toyota make over $40/hour. Their cars routinely outperform ours by 100K miles or more. Foreign cars are actually more expensive to buy and fix, but they break down less often.
And when you say something like "justify all you want about poor quality," you are saying that we need to buy what union workers make, no matter how sh*tty the quality.
No, I won't fall for that. I have an american made pickup truck and a japanese made daily driver. I buy whatever the h*ll I want. It's the unions' fault for overstepping their bounds and forcing GM, Ford, and Chrysler to pay full retirement benefits at a ridiculously young age. The unions' fault for protecting the jobs of workers who smoke pot and drink on their lunch breaks. And the US government's fault for bailing them out when the rug got pulled from under them.

[aries0413]

Wait wait I thought BO saved the auto industry....It should have the best economy in the country.....Hmmmm

[flyingkite]

yeah...but BO "saved" jobs that would have been lost. I say we keep spending our way out of debt.

[gmcgmc]

NO wonder. America is giving money free money to syrian rebels, Israel, Egypt, and other countries, totaling over 20 billion, and yet we can't help our own cities.

[Roeshin]

The federal government shouldn't have to help every poorly managed city in the US. Detroit did this to themselves.

Detroit is what you get when union leaders are allowed to control the numbers of people necessary to control politics for decades.

[bucolucas]

And the federal government shouldn't have to help every poorly managed country, either.