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.

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"The city of Detroit should not go broke due to one law firm," he added. "If that’s the stance he’s taking, then I think he needs to sit down and rethink his position as mayor.”

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Most of the city’s most powerful unions took the city council’s side. A representative for the American Federation of State County and Municipal Employees told the council that a criminal inquiry into the selection of Miller Canfield was needed. Late Tuesday, the union released a statement calling for a federal and state investigation.

Political scientist Vincent Hutchings at the University of Michigan in Ann Arbor says that it isn’t shocking that the city and state continue to wrestle over procedural issues over how to regain financial stability in Detroit. Besides an obvious political party split – Detroit has long leaned for Democrats while the state legislative majority is Republican – there is also a racial divide, which is “always a subtext in Detroit-Lansing relations,” Mr. Hutchings says.

“People are more inclined to acquiesce to intervention if they think the party seizing control has their best interest at heart. It may well be the governor’s office has the best interest of Detroit in mind, but it does seem patently clear the city council doesn’t think that’s the case,” he adds.

Because both sides represent different interests, it may be unlikely for true harmony down the road “because they don’t have the same worldview and don’t represent the same interest,” Hutchings says. “So the real question is: Why should we expect them to come together?”

In talking with reporters Wednesday, Bing said the city will not miss debt payments and promised that the savings from the furloughs will only be used to diffuse the city’s financial crisis.

“Bankruptcy is not an option,” he said.

Earlier this year, Michigan Gov. Rick Snyder (R) avoided appointing an emergency manager to take control of Detroit’s finances following a state commission report that showed the city’s budget deficit reaching $200 million and a looming emptying of cash reserves. At that time, Moody’s Investors Services issued two separate downgrades of the city’s tax credit rating.

Instead, the governor pushed for a consent agreement that conceded budgetary power to city officials but allowed the state to play a more supervisory role through a chief financial officer tasked to usher the city along to meet fiduciary guidelines outlined in the agreement terms.