September 4, 2008 / 8:24 PM / 9 years ago

Incoming Detroit mayor mulling forensic audit

DETROIT (Reuters) - The incoming mayor for Detroit said on Thursday that he was considering a forensic audit of the financially strapped city's finances.

Kenneth Cockrel, a former journalist and community activist, is expected to become mayor of Detroit in two weeks upon the resignation of Mayor Kwame Kilpatrick, who pleaded guilty Tuesday to obstruction of justice.

"A financial review is a top priority for me, we need to get a better handle on our finances," Cockrel, the Detroit City Council president, told reporters.

Cockrel had previously supported audits of the city's finances. Detroit has run budget deficits for several years.

"I do think the finances of the city of Detroit, and determining the true nature and state of the city's finances, are critical so that we can get a better understanding of what issues we are dealing with, where the land mines are and how to defuse those land mines," Cockrel said.

Ted Damutz, a ratings analyst at Moody's Investors Service, said a forensic audit of Detroit's finances "seems like a good starting point."

Detroit faces the same problems that led to a ratings downgrade by Moody's in May, Damutz said.

"Our rating decision was not based on one political head," Damutz said. "They still have a lot of work to do in the coming months."

Kilpatrick, once seen as a rising star in the Democratic Party, agreed to a four-month jail sentence, five years probation in which he agreed not to run for public office, $1 million restitution and resignation as mayor.

The 11th largest city in the United States, Detroit has been in a downward spiral in recent years along with the fortunes of the U.S. auto industry.

The city has been ravaged by a declining population and high unemployment, ranking as the poorest big city in the United States, according to 2007 census data.

Moody's dropped the city's general obligation bond rating to "Baa3" from "Baa2" in May, citing nagging budget deficits, late financial audits and a struggling economy. It downgraded Detroit's limited-tax GO debt into the junk category.

Reporting by David Bailey, Kevin Krolicki and Karen Pierog

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