Jan 3 Detroit's cumulative budget deficit
increased to $326.6 million in fiscal 2012 from $196.6 million
in fiscal 2011, according to a city audit released on Thursday.
The comprehensive annual financial report painted a bleak
picture of Detroit's finances that included a drop in revenue, a
bigger debt load and falling credit ratings.
"The deficits raise significant liquidity risks regarding
the city's ability to meet its financial obligations as they
come due without raising revenues, cutting costs of services
provided, and effectuating financial restructuring," said KPMG
LLP, the city's auditor, in the report.
The burgeoning deficit comes as Detroit inches closer to
getting a state-appointed emergency financial manager who would
control its finances and who could decide to take the city to
federal bankruptcy court unless Michigan officials block the
Detroit was able to skirt the appointment of a manager last
year by signing onto a consent agreement that gave the state
some oversight of its finances. But slow progress on reforms led
state officials to launch a review in December that could
culminate with the city getting a manager to speed up the
A review team has met three times, according to Terry
Stanton, a spokesman for Michigan's Treasury Department.
"There is no time frame for the report to be complete, other
than the governor having asked for an expedited review," he said
For fiscal 2012, which ended on June 30, Detroit's revenue
totaled $2.3 billion, while its expenses totaled $2.6 billion,
according to city officials. A revenue decrease of $170.5
million from the previous fiscal year included an $18.9 million
drop in property taxes and a $66 million drop in state revenue
sharing. Detroit, a city of 700,000, has been hit by a steep
Meanwhile, the city's long-term debt obligations jumped to
$9.4 billion in fiscal 2012 from $8.7 billion in fiscal 2011 due
to the issuance of water and sewerage department bonds and an
increase in the city's retiree health care liability, according
to the report.
Concerns that Detroit may run out of cash and potentially
default on some debt led credit rating agencies to drop the
city's ratings deeper into the junk category during the previous