Quantcast
Regional News

Detroit Cash Hole "Deeper Than Thought," State Help Needed

DEC 4, 2012 4:23pm ET
Print
Email
Reprints
Comment
Twitter
LinkedIn
Facebook
Google+

CHICAGO — A top official in Detroit Mayor Dave Bing’s administration told the City Council Tuesday that getting Michigan to release bond funds is the only way to make it through the city’s latest cash crisis.

“We have to take strong action to right our own house so the only lender we have available to us — the state — is comfortable in release of the bond proceeds,” said program manager William “Kriss” Andrews, who oversees the consent agreement Detroit inked with Michigan earlier this year to avoid an emergency manager.

“We’re all capable of running it better than this, and the sooner we get help the sooner we get it fixed,” he added.

Andrews and other top city officials met with the council to discuss Detroit’s precarious fiscal position and the steps needed to make it through the end of the calendar and fiscal years.

In addition to approving measures required by Michigan to win bond proceeds from a state-controlled escrow account, the council also needs to approve a budget amendment that will allow the city to file its annual audit by the end of the year to secure the latest installment of state revenue aid.

The council will meet Wednesday to vote on the budget amendment, which features a payment plan to address a $29 million shortfall in the city’s annual pension contribution.

The 2012 budget apparently did not include the payment, and the city has scrambled over the last two weeks to cobble together a plan with Detroit’s enterprise agencies, including the water, sewer and transportation departments, to make the payment to avoid a hit to the general fund, finance director Cheryl Johnson told the council.

The pension payment will allow the city to complete its 2012 Comprehensive Annual Financial Report on time.

A timely CAFR filing is needed to win release of the latest installment of state revenue aid.

“We’re doing everything possible so that revenue is not held up,” Johnson said.

Meanwhile, Bing is expected to meet with the council Dec. 11 for another special session that could include a new vote on a controversial contract hiring of public finance firm Miller, Canfield, Paddock and Stone PLC as special counsel to oversee the consent agreement.

The contract is one of three so-called milestones Michigan is requiring to release $30 million of bond proceeds from a bond transaction last August.

Without approval, the state has said it will not release the funds on Dec. 20 as scheduled.

The council already rejected the three-year contract, but Bing has asked for a new vote.

Even if Detroit wins release of the $30 million, a shortfall remains. The most recent fiscal forecast, released last month, projected a $47 million shortfall by next July without new revenue sources.

The city’s only option is to continue to meet the state’s requirements for releasing more bond proceeds, Andrews told council members.

“The cash hole is deeper than any of us would prefer,” Andrews said. “We’re going to have a little greater difficulty in pulling in all of the bond proceeds beyond that $30 million. The only thing we can do is exercise the maximum self-help so our lender, the state, is confident we’re acting appropriately and responsibly, and will release more rather than fewer of the proceeds. I see that as the only avenue to get through this.”

Council members voiced a range of concerns, with several members complaining that the administration had not given them an accurate picture of the city’s fiscal situation.

“My major concern is really with the need to get a global picture of what the city’s cash position is,” council member Ken Cockrel Jr. said. “It’s almost like you got a 50-piece jigsaw puzzle but the council is only getting three of the pieces.”

JOIN THE DISCUSSION

SEE MORE IN

RELATED TAGS

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments:
Not Registered?
You must be registered to post a comment. Click here to register.
Already registered? Log in here
Please note you must now log in with your email address and password.

markets
markets
markets

Social

facebook
linkedin

New York's budget leaves it at risk of becoming one of only five states that do not allow the use of design-build procurement to deliver public infrastructure projects.

Upcoming Events

the bond buyer conferences
Already a subscriber? Log in here
Please note you must now log in with your email address and password.