DETROIT – Detroit Mayor Dave Bing responded Wednesday to the state financial review team's findings that a financial emergency exists in the city, and no satisfactory plan is in place to resolve it.
In a statement Bing said "Yesterday, the Financial Review Team asserted that there was no plan in place to correct the City's financial emergency. To the contrary, my administration has worked diligently to develop and implement a restructuring plan for the City of Detroit. In fact, our plan was reviewed and accepted by all stakeholders, including the State and the Financial Advisory Board. We have the plan, but we face significant challenges executing it in a timely manner. We are hindered by several factors, including the City Charter, labor agreements, litigation, governmental structure, and a scarcity of financial and human resources. Further exploration of ways to mitigate these barriers for more timely implementation of my initiatives should be examined."
Wednesday a judge said the Detroit school board has authority over academic policies, at least for the next five weeks before a new emergency manager law kicks in.
The decision by Wayne County Judge Annette Berry means the board and emergency financial manager Roy Roberts must talk more and work together on some key issues.
Berry appeared sympathetic to the board and Roberts, who was appointed by Gov. Rick Snyder. The power struggle began last year when an emergency manager law was suspended for months and ultimately repealed by voters.
Roberts has remained on the job under an old manager law. But a new law starts in late March, restoring much of his previous authority in the struggling school district.
Watch: Detroit's review team: 'financial emergency' does exist
In its report, the Review Team cited several conditions, including the following, in making its determination:
- The City continues to experience a significant depletion of its cash reserves. Projections estimate a cumulative cash deficit of more than $100 million by June 30, 2013, without significant spending cuts. The Review Team noted that the Mayor and Council have moved forward with some financial reforms, those changes are too often one-time savings and apply only to a small percentage of the city's overall wage and benefit burden.
- The City's General Fund (GF) has not experienced a positive year-end fund balance since fiscal year 2004, with cumulative GF deficits ranging from $155.4 million in FY 2005, to $332 million in FY 2009. The GF deficit was $327 million in FY 2012. City officials have primarily sought to address these deficits by issuing long-term debt.
- As of June 30, 2012, the City's long-term liabilities, including accrued pension liabilities and other post-employment benefits, exceeded $14 billion. City officials have projected that over the next five years, expenditures needed to fund certain long-term liabilities will total nearly $1.9 billion. However, City officials have not devised a satisfactory plan to address long-term liabilities.
- The City Charter contains various restrictions and structural impediments which make it extremely difficult for City officials to restructure the City's operations in a meaningful manner. Restrictions include extensive steps and timeframes which must be observed before any proposed changes in future retirement benefits may be implemented and provisions which make it all but impossible to reorganize and enhance the delivery of municipal services.
Read: Full review team report
The Governor has 30 days to review the report and make a determination on whether or not a financial emergency exists in the City.