Michigan delivers ultimatum on Detroit finances

State officials aiming to put cash-strapped Detroit on a strict financial diet delivered an ultimatum Tuesday with a plan to shift political power, consolidate public utilities and shrink city staff and salaries.

Detroit is facing cash flow problems and a $197 million budget deficit. A state review team has already been digging into its troubled finances, and the governor could appoint an emergency manager.

City officials would save face and preserve some local control by agreeing to the state's plan, but if they contest the terms or fail to meet them, an emergency manager could still be appointed. Republican Gov. Rick Snyder, who approved the deal offered to the city, has said he would prefer to avoid that.

The plan delivered to Mayor Dave Bing and the City Council would give Bing limited emergency manager powers that do not include the ability to restructure or terminate union contracts. The mayor has already been working to cut costs, and the city is awaiting the ratification of union concessions that are seen as key to helping Detroit get back on a more solid financial footing.

The plan would reduce the immediate cash flow pressure on Detroit by $137 million, said state Treasurer Andy Dillon. He said $37 million would be through refinancing existing debt, and $100 million would be through new borrowing.

But the plan would also create a nine-member financial advisory board largely appointed by the governor and state treasurer and three new executive positions— chief executive officer, chief operating officer and human resources director.

Councilman James Tate said the plan likely would result in Detroit's elected officials having little decision-making power.

"If what we're talking is a consent agreement, clearly what has been presented so far — at least the preliminary draft I saw — would not be an agreement," Tate said. "It would be a one-way edict, and I think it would fail miserably."

Snyder insisted the plan was not intended to usurp local authority.

"The mayor is still the chief executive of the city. The city council would still be the legislative body," he said. "But this is additional support and resourcing."

Bing called that "disingenuous," noting that the advisory board would choose and supervise the three new executives, who would have significant power. For example, one section of the deal calls for the mayor and chief operating officer to negotiate collective bargaining agreements together. The deals would then have to be approved by the financial advisory board.

In a statement issued late Tuesday afternoon, Bing said he was disappointed with the proposal and never asked for a consent agreement.

"We've provided the governor with an action plan to resolve our financial shortfall, which we believe is reasonable and achievable with support from Lansing," the mayor said. "This proposed agreement will not solve our problems."

The mayor and the City Council must agree to the deal, which would remain in effect until the city hits certain financial benchmarks for three consecutive years. It was not clear when the deal would come up for a vote.

Dillon and his team spent Tuesday morning in Detroit lobbying for the 25-page plan delivered to City Council members. Snyder pushed it while talking with reporters after a speech in East Lansing.

"Let's get a consent agreement done and let's get the city of Detroit back on the path to being a great city again," the governor said. "That's what I'm focused on."

A state-appointed 10-member review team must report to Snyder by March 27 whether a financial emergency exists in Detroit. If it does, the governor could appoint an emergency manager who would have the power to dismiss the mayor and council and rip up and redo union contracts.

Dillon met with the review team Tuesday afternoon and said afterward that he thought the city would be out of money by late May.

Snyder said the proposed consent agreement offers sorely needed discipline for a city whose finances have been chronically mismanaged.

"One of the challenges we've seen in Detroit, and I would hope most people would acknowledge this, is implementation," Snyder said. "... So we thought it appropriate to say, 'Shouldn't the mayor and I work together jointly on finding the best people that can come implement these things to make sure they happen?' We think that's a fair statement, given the track record and history here."