Aerial view of downtown Detroit. (Courtesy: Mary Schroeder/Detroit Free Press)
DETROIT (Det. Free Press) -- Detroit's financial condition is rapidly deteriorating, with the city possibly running out of cash in a little more than a month, city officials Monday told members of a financial board with oversight of the city's fiscal matters.
The city could be in the red by $3 million to $5 million a month by mid-December, the city's program management director, William (Kriss) Andrews, told the Financial Advisory Board, the joint city-state panel overseeing the city's finances under Detroit's fiscal stability agreement with the state.
Andrews painted a dire and worsening picture.
The city's cash-flow crisis is "more challenging than it's ever been and more challenged than we reported last month," Andrews said, adding that the city will need to find new revenue sources, a difficult proposition even in good times.
Andrews blamed rising medical expenses and lower receipts from taxes and other revenue sources than the city had previously projected.
"Those aren't materializing," Andrews said of expected revenues.
The city's cash crisis is projected to grow through the remainder of the 2012-13 fiscal year to nearly $47 million, unless new revenues are found and the state releases bond sale cash that the state is holding in escrow until the city meets government reform benchmarks in the coming weeks.
Without a fix, the city could see payless paydays, furloughs and unpaid vendors.
"The cash position for the city is more critical than it was a month ago," Andrews said. "We've got to deal with this problem."
Andrews spoke Monday afternoon at the monthly meeting of the advisory board, the panel's first meeting since Michigan voters repealed the state's emergency manager law, Public Act 4, last week. The repeal gutted the state's toughest methods for forcing reforms on troubled cities and school districts.
Public Act 4 gave state emergency managers the power to strip control from local elected officials and toss out union contracts for government workers. Voters rejected those tools when they rejected the emergency manager law.
Gov. Rick Snyder and Michigan Attorney General Bill Schuette say the state's previous emergency financial manager law went into effect when Public Act 4 was suspended this fall pending the referendum; they say Detroit's financial stability agreement with the state largely stays intact because it was based mostly on the previous law or agreements independent of the repealed act.
But unions and others disagree, saying the consent agreement should be tossed out because Michigan has no state emergency manager law since voters rejected Public Act 4, which rescinded the earlier law.
That dispute is certain to be decided by the courts.
Advisory board chairwoman Sandy Pierce said that, despite the repeal of the emergency manager law, both the financial stability agreement and the role of the advisory board remain intact. But she said the city may no longer impose new contracts or employment terms or reject collective bargaining agreements unilaterally.
The primary foundation of the consent agreement wasn't Public Act 4, but rather a state law on intergovernmental agreements and related state laws, "thus the repeal of Public Act 4 does not invalidate the Financial Stability Agreement or the Financial Advisory Board."
Last month, the advisory board warned Bing administration officials that reforms are not happening fast enough, and Detroit risks running out of cash by the end of the year. Mayor Dave Bing and his top aides have conceded that the pace has been too slow but cautioned that the city will soon begin realizing significant savings, particularly from pay cuts and reduced pension and health benefits that Bing imposed on city workers including police and firefighters.
The board immediately went into a closed session this afternoon to discuss the impact of the repeal of Public Act 4 on Detroit's consent agreement on the board's role in Detroit's reforms. The meeting lasted an hour and 15 minutes and included Bing and four members of the City Council.
There appeared to be little more clarity on what will happen with the consent agreement Monday.
Council members have asked the city's legal department to make a legal opinion on how the city should proceed with the agreement in the aftermath of the repeal. But council members already are talking about options such as seeking to disband the Financial Advisory Board or at least eliminate its pay; the city and state split $25,000 annual pay for nine board members and their work-related expenses.
Council President Pro Tem Gary Brown said the city's top lawyer, Krystal Crittendon, is reviewing the matter and expected to give the council an opinion as early as this week.
Her opinion is likely to give the council a significant amount of direction on what can do to reassert its authority and possibly reverse some of the cuts imposed by Bing.
The Bing and Snyder administrations brokered the consent agreement to avoid appointment of an emergency manager. In April, the council narrowly approved the deal, which gave the state broad oversight of Detroit's finances.
Bing did not speak Monday afternoon after attending the closed board meeting.
By Matt Helms, Detroit Free Press staff writer