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Detroit nears deadline from state over finances

- The Washington Times - Monday, December 24, 2012

LANSING, Mich. — Time ticks for the city of Detroit as its burgeoning fiscal crisis and its dispute with the state likely will come to a head soon.

According to news accounts and analysts, the city will see either a state-appointed emergency financial manager early in the New Year or a new consent agreement to give it continued control but tighter deadlines to restructure its finances.

The Detroit News, citing multiple sources, reported over the weekend that state leaders were at work on a new consent deal that would be offered in January and would kick in when Michigan's latest emergency-financial-manager law goes into effect by early April.

Whether that deal will come to fruition is uncertain as negotiations continue amid frustrations in Lansing over the amount of progress city leaders have made -- or rather, not made -- on getting their financial house in order.

Just last week, Michigan Gov. Rick Snyder called for a second review team to scrutinize the financially beleaguered city's finances. The team review, led by State Treasurer Andy Dillon, is a precursor to the state invoking its newly revamped emergency-financial-manager law, which was approved before the state Legislature recessed earlier this month after a productive and contentious session that also made Michigan the nation's 24th right-to-work state.

Holding a pre-holiday media round-table last week, Mr. Snyder was noncommittal about a state takeover and an emergency manager, but he said they remained a possibility and Detroit would have to act soon or the state would do so.

"I'm waiting for the report from the review team," the Republican governor told reporters.

"They are in a crisis," he said of the city. "They have been in a crisis, and it's getting worse every day. I continue to encourage the mayor and city council to work together to do as much as possible."

In spite of his measured tone, however, Mr. Snyder acknowledged that the clock was ticking.

"We need to take action," he said. "That action will take place in the future."

But even as the News said a consent deal remains in the mix, some political observers said as recently as last week that they think an emergency financial manager is no longer an "if" but a "when" for the state to step in to revamp the city's more than $200 million deficit and avert what some fear is a certain bankruptcy.

"I would project by the middle of January you would have the person announced," as emergency manager, said Troy-based political consultant Eric Foster of Foster McCollum White & Associates.

"If you really want to fix the situation here, that is the only way you can do it," Mr. Foster said.

Despite the increasingly dire straits for Detroit's finances, and a piecemeal approach to fixing emerging problems, some city leaders have argued that they -- not outsiders -- should be the one's to handle this crisis.

But many allow that even after much talk from the mayor and the city council, including a new revenue-enhancement plan the mayor pushed out last week, few ideas for a long-term, comprehensive fix have been put forth, making the state's intervention increasingly likely.

The city has operated since last spring under a previous consent agreement with the state that allows state review over Detroit Mayor Dave Bing's efforts to restructure city finances. If he hits established benchmarks, the state releases bond money that it has held in escrow.

That consent agreement averted earlier calls for an emergency-manager takeover, but as time has passed with no broader solutions on the horizon, the governor, who has remained patient with the city, may have to step in.

"The governor, he probably doesn't want to do it, but there is nothing the local leadership has shown that they are willing to put this type of plan on the table and are willing to be aggressive about it," said Mr. Foster, whose consulting firm has approached the city with its own blueprint for fiscal change, which he said has been tepidly received.

Michigan voters in November repealed an existing financial-manager law for the state. It had been used successfully in several cities, including Flint and Benton Harbor and in school districts including Highland Park and Detroit Public Schools but had drawn criticism that it took management of a municipality away from the people who had been elected to do so.

Just five weeks later, however, the state's Republican-led Legislature passed a newly drafted version of the emergency-financial-manager statute, restoring state power to take over cities that cannot manage their finances. It takes effect in late March or early April.

How an emergency manager's takeover for Detroit, the state's largest city, plays out politically is unclear. Mr. Bing has jousted repeatedly with his city council over reform measures but made little headway. The entrepreneur and former NBA star has not yet said if he will seek re-election next year. He took over for disgraced mayor Kwame Kilpatrick in 2009 and was elected that year to serve a full term.

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