Emergency manager says Detroit's finances crumbling

Emergency manager says Detroit's finances crumbling

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DETROIT (WJBK) -

Detroit is broke and faces a bleak future given the precarious financial path it's on, according to a new report out by the city's state-appointed emergency manager.

The report was released late Sunday by bankruptcy attorney Kevyn Orr and is his first on Detroit's finances since officially taking the job in March.

Under state law, the report was due within 45 days of Michigan's newest emergency manager law taking effect. Orr's spokesman Bill Nowling had warned last week that the report was an early look at Detroit's fiscal condition and would not be glowing.

The summation is the latest blow to the city which came under state oversight in March when Gov. Rick Snyder selected Orr to handle Detroit's finances. Then, the city estimated its budget deficit to be about $327 million. Detroit also has struggled over the past year with cash flow, relying on bond money held by the state to pay some of its bills.

But Orr reports that Detroit's net cash position was negative $162 million as of April 26 and that the projected budget deficit is expected to reach $386 million in less than two months.

He also warns that the city's financial health might change as more data is collected and analyzed.

"What is clear, however, is that continuing along the current path is an ill-advised and unacceptable course of action if the city is to be put on the path to a sustainable future."

Detroit is the largest city in the country under state control and the city's wallet is now Orr's to command. He dictates how Detroit spends its money, something that had been the responsibility of first-term Mayor Dave Bing and the nine-member City Council.

The report also looked at attempts officials have made to fix problems.

Here are some of the highlights of Orr's Financial and Operating Plan:

Pubic Safety: Improvement in the Detroit Police Department's operations and performance can be achieved through strategic redeployment of resources. Orr recommends giving more administrative functions to civilians. Additional investments in equipment, facilities and personnel will be required because they've been neglected for too many years.

Fire Department: The department should review options for shared services and contract services. A third-party expert in this field will be brought in to assist in developing the restructuring plant for the DFD.

Transportation: The city and Orr's advisors are investigating short term and long term solutions to improve bus services and reduce the cost of D-DOT operations from the city's general fund.

Public Lighting: In the short term, the city plans to address lighting outage complaints by working with a 3rd party to replace bulbs and fix wiring issues. In the long term, the current number of street lights will be pared down from 88,000 to 46,000.

Water and Sewerage: The emergency manager is currently evaluating operational and financial issues involving the department. All options are on the table in an comprehensive restructuring plan.

Abandoned Properties: Significant reform will be needed involving the demolition process to enhance the speed and effectiveness the problem demands. Meaningful success will require adequate funding with help from governmental, non-governmental and community-based agencies.

Labor Unions: Bargain further concessions from the city's labor unions and seek to reduce or eliminate health care plans for 28,500 city employees active or retired.

City Operations: Some operations should be conducted by outside contractors and opportunities to privatize certain operations will be pursued. Also, systems and procedures will be evaluated including tax collection and grants management to enhance productivity and results. Payroll and other functions will be modernized and consolidated.

- The Associated Press contributed to this story

 

 

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