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Detroit nears deal to avert bankruptcy, but is it a state takeover?

Both city and state officials say they are close to an agreement that could force extensive restructuring of city finances, as Detroit faces a $200 million deficit and bankruptcy by May.

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Still, city officials oppose referring to the final deal as a "consent agreement," which can lead to an emergency manager. The city wants to retain power to approve budgets but will hire a chief financial officer who will report to the mayor, said Deputy Mayor Lewis on Tuesday. The city also wants the state to lend Detroit money – a move that Snyder has refused in the past. 

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“I’m not going to say we don’t have a deal unless there’s money, but we all have to come to an understanding that there needs to be money to make this plan work … turnarounds don’t happen without resources,” Lewis said. A state takeover would be "toxic," he added.

It's a concern that the governor says he shares. “My role is not to run the city of Detroit … my goal is not to have an emergency manager of Detroit. My goal is to have the state provide a supporting resource to be a partner with the city in helping it achieve success,” he said on Monday. 

Both sides appear to agree that a financial advisory board will be established to approve budgets and enforce deadlines. Any agreement signed between the city and state will carry the threat of an emergency manager, if certain guidelines are not met. Snyder said he expects to add “probably two or three additional paragraphs” so that whatever document the city provides “will also qualify as a consent agreement,” although it may not be officially declared as such. 

Avoiding specifics on who ultimately will control the city’s finances is likely to prevent inflaming racial passions in the city, which, unlike the rest of Michigan, is dominated by a majority black population, says Mr. Hutchings. Party divisions are another flashpoint: The Democratic Party is entrenched in city politics, while the Republicans control the state.

“No local city likes to cede control,” he adds. “The situation is fraught with multiple difficulties, which is probably why the governor is reluctant to impose control."

Meanwhile, many Detroit residents are protesting the possibility of the state playing a larger role in management of their city. An open meeting of the state commission was nearly shut down Monday by protesters who shouted, sang, and angrily denounced the state officials for what they see as trying to intervene with the democratic process. One activist filed a request with the Michigan Supreme Court for an emergency injunction to stop Snyder’s team from moving forward.

Adding to the drama is the weekend hospitalization of Detroit Mayor Dave Bing, who remains bedridden.

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