Headen does not believe the city should get that option considering how it did not act under the old one.
The state finished its case in exactly 20 minutes. Now it is the city’s turn.
Deputy Corporation Counsel Edward Keenan disputed Headen’s assessment. He said the City of Detroit does in fact have a satisfactory plan based on the fact that the existing plan is the State’s own plan.
He handed the testimony off to attorney Irvin Corley who went on to tell the hearing officer the city’s current plan has 25 points that it is moving forward. He moved on to the milestone agreements and how the city is working on the implementations that have made the kinds of cuts and changes in healthcare cuts, pension changes, head count and other restructuring puts the city in a surplus of nearly $100 million by June of 2014.
He said It is understandable that the existing plan is slow to move. Lack of resources, challenges by employees, poor i.t. functions, legal challenges. Corley said “arguably it could take 2 years to make such a plan to make progress. We have made many strides in eight months.”
He went on: ”we content the deficit is $772 million dollars not nearly a billion dollars as the review team contends.
Corley wants to give a different perspective on long term liabilities which exaggerates the city’s financial problem. The water and sewer department are supported by fees and has no impact on the city’s general fund. $1.5 billion pension obligation certificates and other post-employment issues can be backed out. When you take other items that have funding behind them the city is only about half a billion dollars in long term debt. The state of overstating the scope of the problem.
Corley said: Using relentless forward cooperation the city and the state can make a modified consent agreement. [this is a slap at the governor of the state of Michigan who likes to use the phrase “positive forward action”.]
Mary MacDowell, the hearing officer, shot back that in reviewing the city’s situation that the City Council could have moved on implementation of the consent agreement far more quickly.
She wants to know how the city can defend its position that it could have moved more quickly.
Corley said “these things take time.”
David Whitaker said many of the problems in looking back… legal challenges… I’m afraid a new initiative bringing in a new emergency manager might add to the delays. We’re beyond having the consent agreement delays.
He went on there is a plan in place, a cash plan too. We claim that it is a satisfactory plan that will get us through the initial period. You have to understand the agreement is a binding contract. It was emphasized by the state.
This document is scheduled to last for three years beyond where the City reaches fiscal stability.
The document also required the program management director and the CFO serve a five year term. They are less than one year in. It was contemplated in the beginning this would take a long time. It is no surprise, after the city voids this plan after eight months.
It was not enough time for the city to reach the fundamental changes given the shortness of time to operate. It is our contention that the current plan should be followed to work this plan through. The governor has said on more than one occasion that he wants to be a partner.
The city needs a partner, we need resources that we don’t have but the state does have. We should work together as a benefit to the city sthe state and the entire region. It is important the city comes back. It is our contention that patience be given and work as partner instead of blowing up a plan that’s designed to take years. We would say the current plan should be allowed to see its way through.
Rebuttal by the state: Headen said the city’s actions of cuts in healthcare, furlough days and the like. There appeared to be a lack of enthusiasm for cutting and no sense of urgency to move on the cash crisis.
He said: Counter measures $6 million surplus this year… we’re aware of that, but that remains to be seen. Mr. Corley points out two thirds of the counter measures are structural. There are problems with timed payments due. The changes the city has made are inadequate.
Finally with regard to longterm liabilities: we did not suggest that some of those liabilities don’t have revenues attached to them. But there is still long term liabilities in the city. I could back out my mortgage from my liabilities but I still owe it. That is the same with the city.
The city owes $14.9 Billion dollars and picking out certain items with dedicated revenue stream changes the staggering amount of long term debt it will have to carry.