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Detroit Tries To Stave Off State Takeover Of Finances

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Detroit officials face a tough vote Tuesday as they try to keep their city from going over its own "fiscal cliff." If the mayor and City Council cannot agree on a plan to reduce the city's budget deficit, state officials are poised to take away their power and assume total control over Detroit's finances.

It's been a continuing vicious cycle: Detroit's population exodus, lost tax revenue and chronic mismanagement have left the city burning through cash to the point where the state of Michigan has to provide funding to help the city meet payroll for the next few months.

At Detroit's Butzel Family Center, the situation has Sean Hendricks shooting a nervous game of pool. He knows the city has to cut costs and maybe even close this recreation center. But he says he hopes it doesn't.

"A lot of seniors go to these places, especially in the summertime," he says. When it's hot out, he says, "They can come in the center and stay for a little while and keep cool. Everything's falling down little by little."

Moody's Investors Service, the rating agency, recently lowered Detroit's rating well below junk status; the city now faces at least a $40 million budget shortfall.

Michigan State Treasurer Andy Dillon says it's likely the only real option is to appoint an emergency financial manager with sweeping powers to gut contracts and sell assets.

"The cash situation is going to be very difficult for the city to reverse," he says. "I think that they've gotten so far down the path that you're just not going to find a big cash solution here quickly."

The state already controls the finances in nearby cities like Flint and Pontiac.

But Detroit Mayor Dave Bing sees a way out. He wants the City Council to pass a number of proposals, including the elimination of roughly 5 percent of the total workforce. Bing is clearly frustrated with his council.

"I've taken things to City Council over time, and they have not been able to respond as fast as I would like them to so that we can start the implementation plan," he says.

But the council's second in command, Gary Brown, says the mayor has it all wrong. He says the city is bleeding money because Bing has been reluctant to cut deeply.

"The council asked the mayor to cut the budget for the last two years — $100 million each year — and he refused to do it," Brown says. "And until we have the political will, we're going to be in this situation and have an emergency manager come in — a dictator — where the mayor doesn't have a function, the council doesn't have a function, there's just one person calling the shots."

With city government essentially gridlocked, and the deficit deepening, residents' frustration continues to mount.

At a recent council meeting, Marine Corps veteran David Malikun-Muqaribu is among an overflow crowd in the hallway outside chambers, shut out from discussions over privatizing 80 percent of Detroit's water department.

"I spent a year in Iraq and I did tours overseas in other theaters, and I'm genuinely blown away to see that I wasted four years of my life to defend democracy only to come back to the city that I'm from to see democracy totally eviscerated," he says.

No matter who ultimately controls the city's finances, one thing all sides agree on is that massive cuts to Detroit's programs and services are coming — even if the city eventually files for bankruptcy protection.

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