UPDATE 2-Detroit city council to appeal Michigan state takeover

Wed Mar 6, 2013 11:01pm EST

By Steve Neavling

DETROIT, March 6 (Reuters) - The Detroit City Council voted on Wednesday to challenge Michigan Governor Rick Snyder's declaration that the city faces a financial crisis and that the state should consider appointing an emergency financial manager.

But Mayor Dave Bing said appointment of an emergency manager is inevitable and he declined to join in the appeal.

"We need to end the drama and in-fighting and understand that whether we like it or not, an emergency financial manager is coming to Detroit," Bing said in a statement.

The council voted 7-1 to appeal Snyder's decision, and Council President Charles Pugh said there may still be time to change the governor's mind. The appeal would not be a court challenge but would ask for a meeting with Snyder's representative to try to change the state's position.

"The governor hasn't decided yet if he wants an emergency manager, so there is still time to convince him we don't need one," Pugh told Reuters. "I'm not saying our finances aren't in trouble, but we can do this without an emergency manager."

The Republican governor on March 1 agreed with a report from a review team he assembled to scour Detroit's finances that concluded the city was in dire financial shape. He also said he had identified a top candidate for the manager job.

The governor agrees with Bing but will review any new information the council can provide and has scheduled a hearing with the council and the state Treasury Department for March 12 in Lansing, said Snyder spokeswoman Sara Wurfel.

The governor will make a decision on the appointment of an emergency manager soon after the hearing, she said.

The birthplace of the U.S. automotive industry and Motown music has suffered under a steep population decline that has left the city with declining tax revenue, rising crime and a costly and out-dated government structure.

The pronouncement of a financial emergency set up a 10-day deadline that falls Monday for city officials to request a hearing. In a March 1 letter to the city, Snyder said upon that request, a hearing would be held next Tuesday before Michigan Chief Deputy Treasurer Mary MacDowell.

Some Detroit City Council members have been advocating for a new consent agreement to replace an April 2012 one that the review team concluded was not working sufficiently to improve the city's finances. But the hearing will be restricted to whether or not the team had reasonable evidence to back up its conclusions.

Information beyond the review team's scope or new actions taken by the city since the review concluded "will be considered beyond the scope of the hearing," the governor's letter said.

If the governor reaffirms a fiscal emergency for Detroit after the hearing, city officials could seek to overturn that determination in state court. However, the grounds for reversal are narrow, based only on a lack of supporting evidence or if the governor's decision is judged to be arbitrary or capricious.

Some Detroit City Council members have voiced support for a court challenge, but such a move would not hold up the appointment of a manager.

Bing said the city should spend its time working with the state and the appointed manager.

"This decision does not mean that I am turning the keys to our city over to the state ... or throwing in the towel. It is simply a fight we cannot win at the 11th hour - in a 30-minute appeals hearing," Bing said.

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