Michigan Treasurer says Detroit to run out of money by May

The skyline of Detroit, Michigan is seen from Windsor, January 4, 2012. To match Feature DETROIT/GLOOM

Lansing, Michigan (Reuters) - The struggling U.S. city of Detroit is on track to run out of money in May instead of April after spending changes made by city officials, Michigan Treasurer Andy Dillon said on Tuesday.

Dillon addressed media following a two-and-a-half-hour meeting with a team that is looking at Detroit's financial picture and trying to assess whether the city needs an emergency manager to take over operations. It was the first time the 10-member team met since it was appointed last month.

He said Detroit's most urgent issue is figuring out how to arrest escalating retiree health care costs, and clean up a balance sheet laden in debt and interest costs. Detroit Mayor Dave Bing had earlier predicted it would run out of money in April if spending wasn't curbed.

"It's my understanding that April has been pushed back to May," Dillon said, noting that the mayor "needs concessions from labor to avoid running short of cash."

Dillon said the team met with a "sense of urgency...and there was also anger," because members of the team asked "how come we didn't know the numbers were this bad?'" he said.

He said the team -- which includes a retired Detroit police chief and former Michigan Supreme Court justice -- used audited financial statements and a report furnished by the business community as a basis for their initial meeting.

Dillon expects to make a recommendation on a Detroit emergency manager within the next 50 days. As his team digs into Detroit finances, Detroit Mayor Dave Bing is working to extract significant concessions from labor unions.

If Bing delivers a convincing cost-cutting plan to the state, Dillon said he would be able to suspend the work of the financial review team. Bing has said he expects to deliver a plan in early February.

The team was named by Governor Rick Snyder after a preliminary review of city finances showed "probable financial stress" after Detroit was unable to tackle mounting deficits.

Detroit, with a population of 714,000, has faced hard times as the contraction of the auto industry has led to a dwindling population and lower revenues. More than 36 percent of the Motor City's residents live below the poverty line, according to the U.S. Census Bureau.

Dillon's team will meet with Bing administration officials, members of the city council and labor unions in coming weeks. Dillon said that although this is a financial review, it's also a review of the "quality of life."

The panel wants to "make sure residents aren't waiting for a bus to arrive, or when they call 911 public safety arrives...to make sure people are safe in the neighborhoods and there is lighting in the neighborhoods."

(Reporting By John Stoll; Editing by Andrew Hay)