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Detroit rejects funds, will the city be out of cash by Christmas?

Detroit's city council rejected a condition that $10 million in much-needed aid was dependent upon. The city, which is struggling financially was expected to receive $30 million from the state of Michigan by mid-December.

By Reuters / November 21, 2012

City of Detroit activist Sandra Hines holds a protest sign to encourage the Detroit City Council members to vote no on a contract to hire a firm to help carry out an overhaul of the city's finances, during a full council meeting in Detroit, Michigan November 20.

Rebecca Cook/Reuters



Detroit will not get a much-needed $10 million after the city council rejected on Tuesday a contract to hire a law firm that was part of a deal to keep the city on track to overhaul its finances.

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The state of Michigan and its biggest city, Detroit, announced a deal last week that includes several milestones the city must achieve in the next month to receive the $10 million by Tuesday and another $20 million by Dec. 14.

The setback leaves the city at risk of running out of cash by the end of December if it does not meet those goals.

In a voice vote, the city council rejected a contract for the law firm of Miller, Canfield, Paddock & Stone to provide legal advice and to handle litigation related to implementing a financial stability agreement designed to fix city finances.

The rejection "means the city will not receive the first $10 million scheduled for release today," said Mayor Dave Bing in a statement issued right after the vote.

Mayor Bing said the rejection of the contract will make it more difficult for Detroit to maintain positive cash flow.

"It will be more difficult for the city to maintain its liquidity until the receipt of property tax revenues beginning in January. Today's vote is one more example of how city council has stalled our efforts to bring financial stability to the city of Detroit," the mayor said in the statement.

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