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Detroit mayor announces furloughs to avoid bankruptcy

Detroit City Council is balking at next step in a state plan to restore financial stability to the embattled city, delaying a $30 million infusion of state funds.

By Staff writer / November 21, 2012

Detroit activists hold up protest signs to encourage Detroit City Council members to vote "no" on a contract to hire a law firm that was part of a deal to overhaul the city's finances, during a full council meeting on Nov. 20. The council rejected the measure, 8 to1.

Rebecca Cook/Reuters

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In order to make up for a $30 million shortfall expected by year's end, Detroit Mayor Dave Bing announced on Wednesday that city employees will take unpaid furloughs and that he would implement “other cost-savings actions” starting the first of January.

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“We will ensure that revenue-generating departments are not impacted by these cost-cutting measures. Most importantly, I want our citizens to know that public safety will not be jeopardized,” he said in a statement.

The cutbacks are a response to the latest pushback from the Detroit City Council over demands by state officials to bring long-needed financial stability to the city.

On Tuesday, the city council voted 8-1 against hiring Miller Canfield, an international law firm with offices in Detroit, tasked to shepherd the city though a fiscal reform plan established by the Michigan Department of Treasury last week. Failing to hire the firm puts the city out of compliance with the plan, which is designed to provide the city with access to $30 million in bonds held in escrow since March. The bond money was part of $137 million that the state has raised on the city’s behalf through a debt sale.

Had the city agreed to move forward with Miller Canfield, the state would have released $10 million to the city that same day, with an additional $20 million by mid-December. In a state released late Tuesday, Mayor Bing said the vote “is one more example of how city council has stalled our efforts to bring financial stability to the city of Detroit.” He added that the only remaining cash infusion on the city’s horizon was property tax revenue due in January.

City council members rejected the $300,000 contract with Miller Canfield primarily because it presented a conflict of interest, as the firm was hired by the state to write the agreement that the city is now tasked to follow. Some members also criticized Bing for suggesting the city will go bankrupt by the end of the year and said that they deserved more time to seek other bids.

During Tuesday’s meeting, council member Kwame Kenyatta described the contract as “a violation of morals,” according to the Detroit News Wednesday. “I don’t see how any member at this table in good conscience on behalf of the people of the city can vote for this,” Mr. Kenyatta said.

Council President Charles Pugh also blasted the mayor, telling WXYZ-TV, the local ABC television affiliate,  that the law firm “was shoved down our throat, and we felt like we were being forced into accepting one particular law firm."

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