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."

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