December 7, 2012 / 10:15 PM / 5 years ago

Detroit eyes layoffs, other actions to avoid state control

DETROIT, Dec 7 (Reuters) - Under pressure by Michigan officials to turn around Detroit’s sagging finances, city officials said on Friday they will lay off hundreds of workers in addition to putting some on unpaid leave to stave off increased state oversight.

Mayor Dave Bing and top officials outlined plans to lay off 400 to 500 employees over the next two to three months in all non-revenue generating departments, including police and fire, exempting beat officers. He also reiterated plans to put more city workers on unpaid leave.

“I’ve got to make sure that this house that’s on fire doesn’t implode,” Bing told reporters.

Bing, however, cautioned that Detroit’s financial recovery is likely to take more than eight years.

Frustrated by the slow pace of reform and worried about the city’s long-term viability, Michigan’s Treasury Department said this week it will start a review process that could lead to an appointment of an emergency financial manager to oversee Detroit’s finances.

The city avoided such an appointment earlier this year by signing a consent agreement that gave the state some oversight. However, Bing and the nine-member city council have been at odds over some of the measures the mayor and state officials believe will lift Detroit out of its fiscal hole.

Bing said he will urge council members to approve at a meeting on Tuesday several conditions tied to reforms that state officials want in order to release $30 million of bond proceeds for Detroit’s near-empty coffers.

One of those conditions is a contract with law firm Miller Canfield to deal with issues related to the consent agreement. The council rejected that contract last month, citing concerns over potential conflicts of interest by the law firm and the validity of the contract.

Detroit, a city of 700,000, has been hard hit by a steep population drop, years of severe budget deficits and escalating employee costs, factors that led state officials to begin an intervention process a year ago.

The appointment of an emergency manager to oversee the city’s finances would bring Detroit a step closer to a possible municipal bankruptcy filing because a manager is a prerequisite for that move under a current state law. However, that law, which took the place of a stronger 2011 emergency manager law that Michigan voters repealed on Nov. 6, also gives the state the opportunity to block the path to bankruptcy court.

Bing reiterated on Friday that he did not think the city would benefit from an emergency manager or a bankruptcy. But he also said he understood it was a possibility.

“I‘m a realist and I know that could in fact happen,” Bing said. “But I‘m also a fighter, so I haven’t given up.”

A new emergency manager bill that includes a bankruptcy option for local governments and that has the backing of Governor Rick Snyder’s administration surfaced in the Republican-controlled Michigan House this week.

The new legislation would keep intact any ongoing review process, existing consent agreement and appointed manager for Michigan local governments and school districts.

However, it would give the elected officials of local governments determined to be in a fiscal emergency several options: a choice between municipal bankruptcy if the move is approved by the governor, an emergency manager, arbitration with a neutral party or a consent agreement.

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