CHICAGO – Detroit and Michigan officials unveiled a new agreement that outlines key reforms the city must implement to win release of badly needed dollars from a bond-financed escrow account controlled by the state.
Detroit Mayor Dave Bing and Michigan Treasurer Andy Dillon Thursday morning signed a memorandum of understanding that features 10 so-called milestones the city must reach over the next several weeks.
Among the requirements are the hire of well-known Michigan bond counsel firm Miller, Canfield, Paddock and Stone PLC as the city’s outside legal counsel, and the hire of a restructuring firm to help the city craft a five-year outlook and a plan to bring down its long-term liabilities.
The measures outlined in the new agreement are already included in the historic consent agreement inked between the city and the state early last summer, but progress has been too slow, according to the state.
“The funds from the bond proceeds were never intended to fund the status quo in Detroit, but rather aid with its government reforms,” Dillon said in a statement. “While some progress has been made in the city since the signing of the financial stability agreement in June, it is moving slower than what all parties would have anticipated. There is still much work to be done.”
If the city implements the reforms – an effort that depends on highly uncertain City Council support – the state will give it $10 million on Nov. 20 and $20 million on Dec. 14.
The money would come from an escrow account set up last August when the Michigan Finance Authority sold $129 million of bonds on behalf of Detroit. Roughly $80 million of that was put into the state-controlled escrow account.
Without the money, Detroit is on track to go broke by mid-December, the city said earlier this week. With a razor-thin cash cushion, it is the third time this year that Detroit has come close to running out of money.
“We are committed to our reform agenda as it is the only way for the city of Detroit to achieve financial stability and to improve the quality of life for our citizens,” Bing said in a statement.
One of the 10 measures requires Detroit’s corporation counsel, the city’s top attorney, to sign off on all future debt financings. Corporation Counsel Krystal Crittendon blocked last August’s Michigan Finance Authority sale by refusing to sign off on the bond documents, and has repeatedly called the consent agreement illegal.
The city council has asked Crittendon for a fresh opinion on the legality of the agreement in light of the recent repeal of the state’s emergency management law, Public Act 4, and was set to meet with her Thursday afternoon in a closed-door session.