CHICAGO - Michigan officials downplayed the possibility of bankruptcy for Wayne County as the county begins to walk down the same path toward financial emergency as its largest city, Detroit.
"I understand the uncertainty, but I will tell you that Chapter 9 isn't even under consideration or being talked about by the state or the county," Michigan deputy treasurer Wayne Workman said in an interview.
"If I were an investor I'd say this is the best news I've had in a long time," he said. "Most of the time I'm picking up the paper and reading about next year's deficits. Now that's all going to change."
Workman made the comments Friday, the same day Treasurer Nick Khouri agreed to launch a preliminary review of the county's finances, the first step toward a declaration of financial emergency. The county, which is rated in junk territory by the three biggest ratings agencies, has just under $700 million of limited-tax general obligation bonds outstanding and $302 million of LTGO notes.
County Executive Warren Evans asked the state on June 17 to declare the county to be in a financial emergency. Evans wants to enter into a consent agreement with the state to boost the county's powers to deal with labor contracts and other issues pressuring the county's bottom line.
The move spooked investors and prompted the county to delay by one week a planned $186 million note sale. The county is home to Detroit, where the nation's largest municipal bankruptcy played out. Both the city and county have struggled with deteriorating fiscal positions for years.
Workman sought to highlight the differences between the two credits, including the political position of the leadership toward the state.
"We're really encouraged that the county executive came to the state treasurer and asked for this help and they are very serious about trying to fix it," said Workman. "They want to address it quickly."
The county has a larger tax base, among other things, Workman said. "We think the consent agreement under Act 436 [Michigan's law for distressed governments] gives all the tools that the county needs to fix this."
The market was shaken by Detroit's decision to treat its general obligation bondholders as unsecured, but Workman downplayed the possibility that that could happen again.
"That was a decision that was made by Kevyn Orr as emergency manager and Wayne County is not going to have an emergency manager," Workman said.
State law allows the local government that is in financial emergency to choose from four choices: bankruptcy, neutral evaluation, emergency manager, or consent agreement.
Evans has said that the county could run out of money and be in a negative liquidity position by next summer without major changes. His letter to the treasurer said the county needs a consent agreement to implement Evans' recovery plan, which eliminates a $50 million structural deficit, and a $486 million unfunded pension liability.
