U.S. News

Michigan says Flint has financial emergency

(Reuters) - Flint is the latest Michigan city to have its shaky finances lead to a declaration of a financial emergency and the possibility of a state takeover.

A chain-locked gate keeps visitors out of what was once a sprawling industrial complex known as Buick City near downtown Flint, Michigan July 8, 2009. REUTERS/Rebecca Cook

Governor Rick Snyder agreed with the findings of a state-appointed review team, which concluded that a financial emergency exists in Flint and recommended that the governor appoint an emergency manager to run the city, Terry Stanton, a spokesman for the Michigan Treasurer’s Office, said on Wednesday.

Stanton said the city can request a hearing or pass a resolution with a two-thirds vote of the city council authorizing the city to appeal the findings in Ingham County Circuit Court.

Flint Mayor Dayne Walling was not immediately available for comment. However, a news release posted on the city’s Web site on Wednesday said the city’s financial position has “significantly improved.” The operating deficit fell to $7.34 million from a previously projected $14.62 million, according to the release.

“The necessary reforms that have been implemented took time to demonstrate their benefit but now the savings are clear,” Walling said in a statement.

But Michigan’s review team concluded that the city, which is located about 60 miles northwest of Detroit, failed to follow deficit elimination plans submitted to the state treasurer’s office and currently lacks a “satisfactory” plan to fix its finances.

The team’s report, which was submitted to Snyder on Tuesday, also pointed out Flint’s general fund expenditures have exceeded revenue since 2007 and that the city has had deficits since 2008.

The city also recently issued $8 million of fiscal stabilization bonds to boost its cashflow, which continues to be strained, the report said.

Flint previously had an emergency financial manager from June 2002 through July 2004 and its financial emergency declaration was lifted in January 2006.

But a state law enacted in March increased the power of emergency managers, allowing them to modify or end collective bargaining agreements with public sector workers.

State-appointed managers are currently in place in the cities of Pontiac, Ecorse and Benton Harbor and for the Detroit Public Schools, while the Highland Park School District’s finances are under review.

Just last week Detroit Mayor Dave Bing said Michigan’s biggest city faces a projected cash shortfall of about $150 million by the end of March and warned about a state takeover.

On Tuesday, the mayor met with city union leaders on his request for concessions, including medical, pension and work rule changes, that would save Detroit $118 million annually.

“The mayor asked union leadership, which represents 48 separate bargaining groups, to form a steering committee and appoint a financial advisor to assess the City’s financial position,” said a statement from Bing’s office. “The mayor has opened up the books to the unions in hopes of reaching an agreement by November 21.”

Reporting by Karen Pierog in Chicago