DETROIT Nov 20 Detroit will not get a
much-needed $10 million after the city council rejected on
Tuesday a contract to hire a law firm that was part of a deal to
help the city overhaul its finances.
The state of Michigan and its biggest city, Detroit,
announced a deal last week that includes several milestones the
city must achieve in the next month to receive the $10 million
by Tuesday and another $20 million by Dec. 14.
In a voice vote, the city council rejected a contract for
the law firm of Miller, Canfield, Paddock & Stone to provide
legal advice and to handle litigation related to implementing a
financial stability agreement designed to overhaul city
The rejection "means the city will not receive the first $10
million scheduled for release today," said Mayor Dave Bing in a
statement issued right after the vote.
Mayor Bing said the rejection of the contract will make it
more difficult for Detroit to maintain positive cash flow.
"It will be more difficult for the City to maintain its
liquidity until the receipt of property tax revenues beginning
in January. Today's vote is one more example of how City Council
has stalled our efforts to bring financial stability to the City
of Detroit," the mayor said in the statement.
Detroit has struggled with its finances for many years as
the city's population has dwindled and the automotive industry
that once drove economic activity in the Motor City has
The city of 700,000 has been criticized by state officials
for slow progress on financial reforms. It needs the money to
avoid running out of cash by the end of the year. Detroit raised
$137 million earlier this year through a debt sale, but can only
access that money if it meets the conditions in the deal.
"If the milestones are not completed, the funds will not be
released from escrow," Caleb Buhs, spokesman for the Treasury of
Michigan, told Reuters.
"The actions Detroit must take for the Treasurer to release
the funds from escrow were clearly established in the Memorandum
of Understanding, sent to the Mayor and City Council last week,"
Projections presented by city officials to Detroit's
oversight board showed the city's weekly cash flow at just $4.1
million in mid-December before dropping to a negative $4.8
million at the end of the year.
Detroit's financial advisory board was created under an
agreement that allowed Detroit to avoid the appointment of an
emergency manager to run the city while giving the state some
oversight and allowing the mayor to disregard collective
bargaining agreements with unions.
The city council did approve on Tuesday a contract with
Ernst & Young to provide cash-flow analysis for 2013. This was
another condition set in the deal with the state.