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Unrest feared in financially troubled Detroit

City in the midst of a financial meltdown, legal tussle with state

LANSING, Mich. |— As the clock ticks down on Detroit's long-coming financial meltdown, some residents wonder if the Motor City is poised on the edge of an explosive summer of unrest.

Last week, members of the Detroit City Council said they would let play out a legal challenge to an agreement with the state over revenue-sharing - even as the city is set to run out of money by Friday.

Detroit has filed a lawsuit against the state of Michigan seeking funds it says are due the city. The state disagrees and has warned Detroit that the perpetually cash-strapped city will lose $80 million in state revenue-sharing funds if it doesn't drop the lawsuit, which is slated to be heard Wednesday in Ingham County Circuit Court.

Without that cash infusion from the state, Detroit faces bankruptcy and a possible state takeover, warns Mayor Dave Bing, who has called for the lawsuit to be withdrawn.

The latest drama has some in Detroit saying it's time to let the state take over.

"The consent agreement isn't working, and won't work, because the city officials ... won't or don't have what it takes," said an editorial in the Detroit News, which also described Mr. Bing as "impotent."

Stephen Henderson, the editorial page editor at the Detroit Free Press, chided city leaders in a column: "Swallow your pride - or choke on it."

On the News' website, reader Todd Sperl wrote: "My concern here is that we are only a few hot summer days away from civil unrest. Then the council will be on TV calling for the governor to do something."

For months, Republican Gov. Rick Snyder has proceeded gently, aware of Detroit's pride. He offered the city wide latitude to solve its own problems, working with Mr. Bing to develop the current consent agreement in hopes of avoiding the use of the state's controversial emergency financial manager law, which gives the state the power to take over cities drowning in red ink.

Mr. Bing, the former basketball legend and successful businessman elected after the scandal-plagued term of former mayor Kwame Kilpatrick, has long had a fractious relationship with the City Council, but has worked diligently to maintain local control.

But with unions refusing more concessions, the city is staggering under more than $7 billion in legacy costs and underfunded pension liabilities. Debt eats up so much of the budget, the city is struggling to keep up with basic services - including keeping streetlights on.

There's plenty of blame to go around, economists say. For every year since 2002, the city has run a general fund deficit. For every one of those years, it has also had a deficit reduction plan that it has failed to implement, says Bettie Buss, a senior research associate at the nonprofit Citizens Research Council of Michigan.

"You've got a city government that was constructed for and a public infrastructure that was designed for a city of two million," Ms. Buss said, noting that Detroit's population has declined 61 percent since 1950, with 25 percent of that drop since 2010.

"City leaders have not been able to shrink that government as fast as the tax base has shrunk," she said.

Eric Scorsone, a Michigan State University economist who has studied the city's finances, said an emergency financial manager takeover is not inevitable but "highly probable."

"What I think is getting missed here - and it's really dramatic - is if a payment from the state can lead to a crisis this quickly, then I think that speaks to how serious the problem for Detroit really is," he said. "Things may be worse than even some of us thought they were."

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