Saturday, February 25, 2012

Decision on Emergency Management for Detroit Delayed for One Month

Decision on a Detroit emergency manager delayed a month

February 25, 2012
Detroit Free Press

The determination of Detroit's fiscal future and whether an emergency manager will be appointed will be delayed at least one month while city officials scramble to implement a financial rescue plan and avoid insolvency.

Still, the extra time does little to help the city's cash-flow crisis. In the latest city-generated cash-flow forecast, Detroit is projected to have a general fund budget shortfall of $9.5 million by May. It was previously projected that the city would run out of money in April.

As first reported on, Terry Stanton, a state Treasury spokesman, confirmed that a one-month extension has been granted to a state-appointed financial review team whose task it is to recommend whether an emergency manager should take over Detroit's budget.

"The state's financial review team is working through their process, but today's extension doesn't affect the city's efforts to continue to implement our financial restructuring plan," Chris Brown, Mayor Dave Bing's chief operating officer, said Friday in a statement.

An Ernst & Young cash-flow report last year showed that the city would run out of money by April, with a negative balance of $3.9 billion. But a city-generated report shows a $76-million balance in the general fund as of Jan. 27 and a projected balance of $2.5 million in April.

May is when the shortage of cash becomes critical, and the statement projects that the city will end its fiscal year with a $46.8-million deficit. The projections do not include the impact of renegotiated union contracts or employee layoffs.

Monday was the deadline for the 10-person team that is examining the city's budget to make recommendations to state Treasurer Andy Dillon and Gov. Rick Snyder as to whether an emergency manager is necessary, whether a consent agreement with Bing and the City Council should be instituted, or whether a one-month extension should be granted.

The extension could have been granted, in part, because members of the team halted their meetings after an Ingham County judge found earlier this month that the review team's private meetings violated the state's Open Meetings Act.

Bing's administration has been negotiating with the city's 48 labor unions, and has landed tentative agreements with most of them. But the contracts have not been ratified, and there is question whether the savings are enough to stave off financial collapse.

Bing has presented a plan that he says would achieve saving of $102 million by June 30, the end of the fiscal year, through renegotiated contracts, 1,000 layoffs and streamlined operations.

But a memo written by fiscal analyst Irvin Corley Jr. to the council and obtained by the Free Press questions whether the tentative agreements are too little, too late.

"A major concern here is that the tentative agreements have not been implemented, so they have not had an effect on cash flow at this point, and April is only one and a half months away," Corley wrote.

Corley wrote that, according to council calculations, it appears that only $31 million of the $102-million savings Bing had hoped to achieve would materialize by June. 30.

More Details: Highland Park schools to remain open

Gov. Rick Snyder signed legislation Friday aimed at keeping the financially strapped Highland Park school district's buildings open for the rest of the academic year. The law lets Highland Park students stay in their district or move to another that accepts them, with $4,000-per-student stipends that can follow them.

Officials said they expected the district wouldn't be able to meet Friday's payroll, though classes were held. The state hasn't given the district a cash advance, as it did in January and earlier this month.

Jack Martin, a state-appointed emergency manager, was temporarily sidelined because of a court order that determined a state review team whose recommendations led to his appointment had violated the state's Open Meetings Act.

The review team met publicly Wednesday, again recommending the appointment of an emergency manager. But by state law, it appears Snyder can't reappoint Martin until next week.

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