Wednesday, November 14, 2012
Expert: Detroit Could Go Bankrupt Before End Of Year
13 November 2012, WWJ/AP cbslocal.com
Detroit’s financial condition is rapidly deteriorating, and City Hall could run out of cash in December, an official told a state oversight board Monday.
City program management director William Andrews made the assessment at a meeting of the Financial Advisory Board, a city-state panel overseeing Detroit’s finances under its fiscal stability agreement with the state.
Detroit’s cash-flow crisis is “more challenging than it’s ever been and more challenged than we reported last month,” Andrews said.
The city must find new revenue sources, he said, blaming the worsening outlook on rising medical expenses and lower receipts from taxes and other revenue sources than the city had previously projected.
“Those aren’t materializing,” Andrews said.
Projections show Detroit’s cash on hand dropping as low as $3.6 million by Dec. 21. It stood at $53 million on Friday.
To keep afloat, the state will be asked to release about $30 million in bond funding from an escrow account under the consent agreement.
But before they cut a check, Lansing will want the City Council to allow an independent firm to look through the city’s operations for more money.
Advisory board chairwoman Sandy Pierce said that despite Michigan voters’ repeal last week of the state’s emergency manager law, the financial stability agreement and the advisory board remain intact.
But she said Detroit may no longer impose new contracts or employment terms or reject collective bargaining agreements unilaterally.
The primary foundation of the consent agreement wasn’t the now-repealed Public Act 4, but rather a state law on intergovernmental agreements and related state laws.
After hearing from Andrews, the board began a closed session to discuss the impact of the repeal of the emergency manager law on Detroit’s consent agreement.
Mayor Dave Bing and four City Council members participated.
Bing and Gov. Rick Snyder agreed in April on state oversight as an alternative to a state financial takeover.
The nine-member oversight board held its first meeting in June.
Last month, Bing said city wouldn’t run out of cash later this year as efforts to cut costs and restructure services move ahead.
But he expressed dissatisfaction with slowed progress on fixing the city’s finances.
Posted by JRohio at 9:21 AM