March 24, 2012 / 3:00 PM / 6 years ago

Appeals court clears way for Detroit's pact

DETROIT (Reuters) - The court of Appeals in Michigan has cleared the way for a team appointed by the governor to come up with a consent deal to keep the city of Detroit, which could run out of money in months, financially afloat.

Michigan's Republican Governor Rick Snyder addresses the audience during the product launch of the 2012 Ford Focus vehicle at Ford Motor Co's Michigan Assembly Plant in Wayne, Michigan March 17, 2011. REUTERS/Rebecca Cook

On Saturday, however, Detroit Mayor Dave Bing underwent successful surgery to repair a perforation of his intestines and designated his chief of staff as acting mayor while he recovers.

A spokesman for the city said Bing, 68, was resting comfortably and was still involved in talks to reach the consent agreement.

The pressure on Detroit is intense. Monday is the deadline for the governor’s team to recommend what to do to fix the city’s dire financial situation.

Detroit and the state of Michigan have been negotiating to try to stave off the appointment of an emergency manager for the nearly bankrupt city.

Those talks, which continued on Saturday, were given a boost when the court late on Friday reversed an order from earlier in the week that questioned whether the team could meet in private and barred it from issuing a recommendation until a hearing set for March 29.

The review team, appointed by Governor Rick Snyder, has until Monday to issue recommendations to repair Detroit’s crumbling finances, the result of a steep population drop, sinking revenue and a huge debt load.

Once the recommendations are issued, Snyder has 10 days to act. The 10-member team, which includes State Treasurer Andy Dillon, is slated to meet Monday afternoon.

If a consent agreement is not reached, the state could cut off revenue-sharing funds or appoint an outside emergency manager to run Detroit.

A spokeswoman for Snyder said the administration was “thankful” the appeals court had allowed the review team to work toward a resolution of the financial crisis.

“Resolving this crisis in a timely matter is crucial for the residents of Detroit,” Geralyn Lasher, Snyder’s spokeswoman, said in a statement.

Snyder, who has said repeatedly he does not favor the option of appointing an emergency manager for Detroit, was to return on Saturday from a trade mission to Europe.

Bing, who is expected to remain in the hospital for five to seven days, can resume limited administrative duties as early as Sunday, a city spokesman said.


Opponents of any kind of state takeover of the city were disappointed.

“We obviously are still very, very concerned about state occupation of Detroit,” Rainbow Push Detroit President Reverend D. Alexander Bullock said. “I‘m worried that now there will be a top-down, paternalistic approach to public policy that will displace the Democratic process.”

Andrew Paterson, an attorney for Robert Davis, a local school board member and union activist who challenged the financial review team in court, said: “We will review this hastily issued order and will be considering our legal strategy.”

Detroit’s long-term liabilities are estimated to top $12 billion, while the city’s annual budget is put at around $3.1 billion.

Both Fitch Ratings and Moody’s Investor’s Service slashed the city’s ratings and said more cuts were possible as the city and the state of Michigan struggle to agree on a plan to keep the city from running out of cash.

On Friday, roughly half of Detroit’s unionized public employees accepted pay cuts and other concessions to save $68 million a year, actions a spokesman for Snyder said did not go far enough to address the city’s long- and short-term troubles.

The agreements announced on Friday did not include Detroit’s police and fire unions, which also had tentative deals.

Detroit, Michigan’s biggest city, has faced hard times for decades and is expected to run out of cash within months as a result of a huge debt load, a steep population drop and sinking revenue.

Long synonymous with the U.S.-based auto industry, “Motor City” was home to nearly 1.9 million people in the 1950s, and now has a population of about 714,000, shrinking its revenue base. With the U.S. auto industry’s contraction, the city lost 25 percent of its population between 2000 and 2010.

Reporting By Ben Klayman, Tiziana Barghini and David Bailey; editing by Vicki Allen and Todd Eastham

Our Standards:The Thomson Reuters Trust Principles.
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