CHICAGO — Michigan’s House Appropriations Committee will hold a hearing today on a bill that would allow Detroit to sell $250 million of fiscal stabilization bonds to help erase the struggling city’s deficit.
The measure is part of Mayor Dave Bing’s deficit elimination plan. Under the plan, Detroit would sell $250 million to cut down an estimated $325 million deficit and avoid running out of cash by early next year. The move would allow the city to stop issuing short-term notes, on which it has become increasingly dependent to pay bills.
The debt sale would require a change in state law, which currently limits to $125 million the amount of fiscal stabilization bonds a city can issue.
Detroit is also asking the state to include a pledge of local government aid revenue to back the bonds. The state pledge is crucial to help make the bonds marketable, the city’s finance team said recently as it presented the plan to the City Council.
The House Appropriations Committee this morning is expected to consider HB 5626, which was introduced by Rep. George Cushingberry. The Senate version, SB 996, was introduced last week by Sen. Tupac Hunter and is currently before the Local, Urban, and State Affairs Committee. Both lawmakers are Democrats from Detroit.
While striking the $125 million cap, the bills would leave unchanged most of the state’s Fiscal Stabilization Act, enacted in 1981.
The law limits the amount of bonds a city or county can issue to no more than 3% of the amount of equalized valuation of property in the area, and the issuer is required to present the state with a plan for how it intends to avoid future deficits.