Detroit moving forward with long-term fiscal fix

Associated Press
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Detroit Mayor Dave Bings talks during an interview with the Associated Press in Detroit, Thursday, June 14, 2012. (AP Photo/Paul Sancya)

DETROIT (AP) — Delayed by indecision and a doomed legal challenge, Detroit's fiscal overhaul finally is under way just as the man appointed by the state to turn around nearby Pontiac is wrapping up his work.

Pontiac Emergency Manager Louis Schimmel — who has completed nearly 75 percent of his task — views Detroit's quarrels over a consent deal as little more than wasted time.

He wonders why some people, especially on the City Council, waited so long to embrace assistance from the state and Gov. Rick Snyder.

"I have to put myself in the governor's shoes. I feel like, Detroit, whether anyone wants to admit ot or not, is unique," Schimmel said. "It isn't Pontiac or some smaller city. You have to do it the way (Snyder) is doing it. You certainly have to go the extra mile in giving the people in Detroit an opportunity to clean up their own mess."

Public Act 4 allows the governor to appoint an overseer for cities and public school districts near financial ruin. It also allows for consent agreements, giving limited state intervention in place of emergency managers.

Under the consent deal approved in April, a nine-person advisory board will help the city rebound from a budget deficit of more than $200 million and structural debt topping $13 billion. The board will work with Mayor Dave Bing, the new chief financial officer and the program management director, who is responsible for initiating various city changes, including cash stabilization and upgrading the payroll system.

The financial advisory board held its initial meeting Friday.

"We're not going to get through this dilemma without Lansing," Bing told The Associated Press last week. "As long as you're building trust and you're doing what you said you were going to do, I think we'll have the support from Lansing."

Bing said he and other members in his executive office have been frustrated by actions that slowed the city's progress.

"Lansing can look at things from 30,000 feet, but we've got to make things happen day to day," he said. "We're tired and we're frustrated because of all the ... unnecessary infighting."

Some council members had fought against the consent agreement and delayed making two appointments to the advisory board until last week when a judge dismissed a lawsuit by Detroit Corporation Counsel Krystal Crittendon. Crittendon claimed the deal was invalid because the state owed Detroit money from past revenue sharing. Snyder has denied that.

Schimmel said that at some point, Snyder is "going to say enough is enough."

"I didn't have to put up with any of this they are putting up with in Detroit," Schimmel added. "The Pontiac City Council? They are here, but I'm running the show."

When Schimmel was appointed last September, Pontiac faced a $12.5 million deficit and declining property taxes. Soon after taking the job, he fired the city's clerk, attorney and director of public works. He turned over police patrols to the county sheriff and contracted out fire protection.

In April, he announced that Oakland County agreed to issue $55 million in bonds for Pontiac's municipal water and wastewater treatment systems. The water system will be transformed into a stand-alone public corporation, which is projected to save about $52 million over 30 years.

The city's accumulated budget deficit now is somewhere around $8 million.

"We're going to fix it," said Schimmel, who expects to be done in Pontiac by New Year's Day. "I'm not borrowing a dime. I'm not going to kick the can down the road anymore."

Emergency managers also are in place in Benton Harbor, Flint and Ecorse, and the Detroit, Highland Park and Muskegon Heights public school districts.

Benton Harbor's emergency manager ordered firefighters to be cross-trained for police work, which reduced public safety costs by a third. Emergency manager Joseph Harris also negotiated collective-bargaining agreements with many unions.

In Flint, layoff notices were sent to 98 city employees earlier this year, and emergency manager Michael Brown also imposed concessions on two union contracts.

Those now leading Detroit's transformation face similar decisions.

Bing has proposed privatizing some city services. About 900 of 2,500 jobs slated for layoffs remain to be cut. The state also may want deeper concessions from Detroit unions than the city negotiated earlier this year.

At least one financial expert believes Detroit — and Michigan — are only fending off the inevitable.

"The city's debt needs to be restructured," said James McTevia, an adviser to companies in transition. "If an emergency financial manager is not appointed immediately, the city should file for bankruptcy at once."