In 'a big surprise' to Detroit leaders, state to pay little for city's restructuring consultants

Nov 15, 2013

Detroit’s elected leaders are shocked that the state has put a strict limit on how much it will pay for the city’s many restructuring consultants.

Under a memorandum of understanding signed last year, the state agreed to reimburse Detroit for half the cost of those outside contractors.

But Detroit’s finance director told the City Council Wednesday those reimbursements would be capped at $5 million.

Detroit has already racked up more than $60 million in such restructuring costs, and the final tally could run into the hundreds of millions.

City Council President Saunteel Jenkins says this all came as “a big surprise.”

“The $5 million cap that the state is insisting we all knew about is nowhere in writing,” Jenkins said. “It was never discussed with me, and based on the response of my colleagues, it was never discussed with [them] either.”

Mayor Dave Bing was similarly surprised.

“I was not involved in the hiring of the consultants, or the negotiations regarding the payment of their fees,” Bing said in a statement Thursday. “However, we were led to believe the state would pick up half the costs.”

The memorandum, titled “City of Detroit Reform Program,” was signed in November 2012.

In a section titled, “Joint restructuring expenses to be paid by Treasury Department and City,” the document reads: “The Treasury Department will reimburse the City for 50% of the costs of the Restructuring firm or team, and the Operational assistance firms.” There is no mention of a $5 million cap.

But Treasury spokesman Terry Stanton said the state only agreed to pick up 50% of the tab on some contracts.

“It was made very clear, through discussions between former State Treasurer Dillon and city officials, and through subsequent communications with the city, that there was a cap of $5 million in State reimbursements,” Stanton said.

The revelation came as the City Council seeks to find out more about the role—and price tag—of the many contractors Emergency Manager Kevyn Orr has retained to help Detroit through bankruptcy and restructuring.

Jenkins and other Council members say Orr’s office has not been particularly forthcoming with that information.

“It’s almost as if these dollars are being treated as private dollars,” Jenkins said. “They’re taxpayer dollars, and people don’t seem to understand or care that when you’re spending taxpayer dollars, there needs to be a level of transparency. And that transparency is not happening.”