As Snyder ponders emergency manager, an ongoing struggle to keep Detroit afloat

Feb 11, 2013

Detroit can just barely avoid running out of cash this fiscal year--if it implements some key measures.

That’s what the city’s finance officials told its financial advisory board on Monday.

The premise to avoid insolvency involves some immediate cuts, some deferred payments—and a few big “ifs.”

Some of those measures are so-called “structural changes,” like mandatory furlough days, layoffs, and possible pension and health care changes. Others defer payments or take one-time opportunities to grab
cash.

If it all comes together, officials project the city could end the fiscal year in July with a $6.5 million cash surplus—a very small cushion for a city the size of Detroit.

In the meantime, city officials—executing a portion of Detroit’s foundering consent agreement with Lansing-- have hired some outside firms to devise longer-term restructuring plans.

Kriss Andrews, Detroit’s Program Management Director, said he and Chief Financial Officer Jack Martin are consulting with those advisors almost daily.

“We’re always working on all aspects of the mayor’s restructuring plan. Some of that included long-term measures,” said Andrews.

“And I’m certain that those long-term measures are something that the review team and the Governor are concerned about.”

That state review team is supposed to give Governor Snyder a final report on Detroit’s finances by next week.

And that means this is all playing out as the city faces an even more daunting long-term financial forecast—and the imminent threat of Governor Snyder appointing an emergency financial manager.

Michigan’s new, stronger emergency manager law doesn’t kick into effect until the end of March. But anyone Snyder appointed before that point would automatically gain broader powers when the new law goes
into effect.

With Detroit’s financial situation constantly on the edge, it’s easy to overlook that the city has already cut back substantially on a lot of things—especially its workforce.

Furlough days kicked in for some employees this week. And the city has already lost about 1200 employees in just the past few months.

Detroit city council member Gary Brown, who attended the financial advisory board meeting, says with property taxes and other revenues expected to go down even more  next year, the hits just coming.

“It’s difficult to do in one year,” said Brown. “And you certainly can’t do it with all cuts. We’ve got to figure out a way to collect more revenue or generate more revenue, or else…we aren’t going to solve the problem.”