Friday, March 09, 2012

Detroit Seeks $150 Million Loan From State

March 9, 2012

Bing wants state to loan city $150M

Short-term loan to be sought in fiscal crisis, mayor’s office says

By LEONARD N. FLEMING / The Detroit News

Detroit— Mayor Dave Bing is seeking $125 million to $150 million in a short-term loan from the state to help fix the city's fiscal crisis, Bing's office confirmed Thursday night.

Bing's request follows his State of the City speech Wednesday night where he vowed to keep an emergency manager out of the city and called for "tangible support" from the state, including financial and operational support.

According to Bing spokeswoman Naomi Patton, the loan request hasn't formally been made to Gov. Rick Snyder.

Bing's intention to ask for the loan was first reported Thursday by the Wall Street Journal.

"I think the governor is pretty coy," Bing told the Journal. "If Detroit fails or doesn't make it or doesn't come back as soon as we would like it too, it's going to cost the state money anyway. It's you pay me now or pay me later."

Asked about the possibility of a state-financed bailout of the city, Snyder said this week in an interview with The Detroit News: "That doesn't make a whole lot of sense if there's not a solution" to the city's long-term financial troubles.

"This is to have a sustainable answer," he said. "This is not to put off a situation until it becomes a problem again," Snyder said.

The push is on to get city officials to enter into a consent agreement to restructure the city's finances, with Snyder saying Thursday he'd like a deal done this month.

Cuts may be tied to aid

Significant cash assistance for Detroit would need to be appropriated by the Republican-led state Legislature.

One Senate Republican source said it's unlikely Republicans would approve funding for Detroit, sayingthere is "no political will" for a bailout.

In addition to agreeing to cost-cutting measures, Detroit likely would have to commit to privatizing some services, such as economic development and human services, according to sources involved in the discussions.

The Detroit Economic Growth Corp., for example, could take over planning and development duties, as Bing suggested in his speech Wednesday night.

Bing has already proposed outsourcing in the public lighting and transportation departments.

Asked whether it would be a wise investment of state tax dollars to give Detroit a cash-infusion, the governor reiterated: "Not unless there's a long-term plan to success in place."

The governor said Thursday on WJR 760 AM that an agreement is "a work in progress" and that "it's something that needs to happen this month in terms of getting it done because there is an urgency to this."

The city is on course to run out of cash by next month and faces nearly a $50 million shortfall by May.

Snyder's 10-person financial review team has until March 28 to recommend that either an emergency manager or a consent agreement be reached.

"What we really need to do is get a consent agreement done," Snyder said. "I don't want to get in a situation of having a financial manager in Detroit. The mayor doesn't either. And what we really need is an agreement between the mayor and City Council coming together with the state to say here is the plan and here is what's going to be implemented."

A 'phased approach'

In his address Wednesday, Bing said he is in talks with the governor to adopt a "phased approach to restructuring city government."

Terms agreed to by the governor and the mayor would have to be approved by the City Council.

City officials say they will be out of cash next month if the 48 unions don't approve the tentative concessions that are before them. It is unclear when a vote would take place.

A consent agreement, sources say, could spin off services such as the Planning and Development Department or the Department of Human Services to nonprofits or other agencies in addition to other built-in cost-cutting measures such as layoffs.

Council leaders and their aides say that they have not been approached by the mayor about a consent agreement or been updated about the city's cash flow.

"I heard the mayor say publicly that he did not want a consent agreement, so I don't expect him to come to council with a consent agreement," council President Pro Tem Gary Brown said.

"I'm not surprised he hasn't been in front on council."

Short- and long-term plans

Snyder spokeswoman Geralyn Lasher said the governor and state Treasurer Andy Dillon — who is on the financial review team — are working with the city on both long-term and short-term solutions for the financial crisis.

She said Snyder continues to believe a consent agreement is Detroit's best option. Lasher wouldn't say whether the governor would consider a short-term cash bailout from the state.

"I'm not going to discuss that part; they're looking at everything," Lasher said.

"There's a lot of work that all of the parties are willing to do, but as far as specifics of what that would look like, those conversations are still ongoing."

Amber McCann, spokeswoman for Senate Majority Leader Randy Richardville of Monroe, said GOP lawmakers wouldn't rule out the possibility, but "our members would be focused on long-term solutions for the city."

Ari Adler, spokesman forHouse Speaker Jase Bolger of Marshall,said money for Detroit would haveto be tied to union concessions.

"We would have to see what the proposal would be," Adler said.

"If it's involved in some way with some concessions, that would certainly be more palatable than something to just continue the status quo."

"There would be difficulty for House Republicans to simply cut a check for Detroit without there being some concessions involved to help correct the problems that have been happening over the years."

lfleming@detnews.com

(313) 222-2072

Staff Writers Chad Livengood and Karen Bouffard contributed.

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