CHICAGO — Detroit Mayor Dave Bing Wednesday flexed his new powers under the consent decree with Michigan by imposing $102 million of wage and benefit cuts on the city’s unionized workers without consent of the unions or the City Council, which rejected the plan Tuesday.
“As we look back at the way the city has been run the last couple of decades, we can’t continue along that path,” Bing said at a press conference Wednesday morning, saying he ordered the cuts Tuesday night. “It’s incumbent upon this administration to make changes, and hopefully we can change the fortunes of the city as we go forward.”
New chief financial officer Jack Martin said without the pay and benefit cuts, which are a key part of Bing’s 2013 budget, and without a planned $137 million bond refinancing, the city is on track to run out of cash by Oct. 15.
“We have to do this,” Martin said. “We know it’s painful on our employees, but this allows us to fix the problem in an orderly manner. If we do nothing, there will be chaos and we will run out of money.”
The cuts mark the first use of new powers by Bing and the powerful new financial advisory board that oversees the city, which is in a quasi-state-controlled situation.
The consent decree, inked with the state in April, allows the mayor and the financial review board to impose unilateral changes to existing or new union contracts as authorized under Michigan’s controversial new emergency management law, Public Act 4.
The cuts apply to nearly all of the city’s 48 unions, whose contracts ran out June 30, according to city officials.
They do not apply to transit unions, which require negotiation because of the use of federal money, according to Martin.
The measures range from 10% wage cuts to increased pension and health care contributions, reduced vacation and overtime, and a provision that allows the city to make additional changes to contracts as new fiscal problems arise.
The wage reductions will be implemented over the next three to four weeks, while the health care reductions will take a few months to impose, said William “Kriss” Andrews, the city’s program manager, which is a new position created by the state that is tasked with overseeing the decree.
The financial review board approved the proposal last week.
The City Council spent two days listening to heated public testimony and on Tuesday rejected the measure by a vote of 5 to 4.
Bing said the council’s rejection shows it is “obviously not concerned about the financial stability of the city. They have all the documents we have, and yet they did not vote in favor of it.”
The $102 million of cuts are part of Bing’s plan to slash $250 million from the fiscal 2013 budget.
Much of the rest of the savings will come from the planned layoffs of 2,600 employees from the city’s workforce of 11,000.
Detroit has survived on annual bond sales and has spent roughly $150 million more than it has brought in for the past several years, Bing said.
“The city can no longer borrow,” he said.
The mayor expects to encounter legal challenges.
“We’ll face those on a case-by-case basis, but I think the wrong thing for us to do is to sit back and do nothing,” he said. “Without action, the city will simply shut down.”