Detroit Faces $45 Million Gap, Takeover by Michigan, Mayor Dave Bing Says

Detroit faces a $45 million deficit and needs union concessions to help avoid a state takeover, Mayor Dave Bing said in a televised speech.

“Our city is in a financial crisis,” Bing said yesterday. “If we continue down the same path, we will lose the ability to control our own destiny.”

“Without change, the city could run out of cash by April,” he said.

Bing has warned for weeks of the dire fiscal condition of Detroit, the nation’s 19th largest city, having fallen from 10th in 2000, according to U.S. Census Bureau figures. The municipality of about 714,000 may be placed under a state- appointed emergency manager if unions don’t agree to concessions to lower costs, Bing said.

Governor Rick Snyder, a Republican, has said he wants to avoid putting Detroit under a state-appointed emergency manager. He’s said that based on Bing’s description of the severity of the situation, he expects the city to request a preliminary financial review from the state, the first step toward an emergency manager or state monitoring.

In March the Legislature gave broader powers to emergency managers overseeing cities and school districts, including the authority to nullify union contracts and fire city employees.

“We need police and fire to accept the same 10 percent cut in salary that the rest of our city employees have accepted,” Bing said. If public-safety unions agree, it would reduce city expenses by $13 million for the current fiscal year, he said.

‘No Trust’

Unions have rejected Bing’s proposed spending cuts of about $100 million, including 1,000 fewer city jobs. State aid fell $100 million this year and declining property values have diminished tax revenue, according to Steve Serkaian, a city spokesman.

In a Nov. 14 meeting with union leaders, Bing outlined proposed spending cuts totaling $101 million for 2012 and $257 million in subsequent years, according to a briefing paper prepared by the Amalgamated Transit Union Local 26, which represents 540 bus drivers.

Members took an 8 percent pay cut last year, said Brian Miller, vice president of the union. While they realize the city is in financial trouble, Bing is “doing the bidding of corporate America” and wants to break organized labor, he said.

“The union goes to the table with no trust in the administration,” Miller said by telephone before Bing’s speech.

Businesses in the community also may bear an added cost to help the city starting in January, when the local corporate tax rate would almost double to 1.9 percent, from 1 percent, Bing indicated. The mayor also called for the state to restore aid that has been whittled away since 1998, saying the $220 million that would yield would eliminate the city’s structural deficit.

In June, Fitch Ratings cut $453 million in unlimited Detroit general obligation bonds to BB-, the third-highest noninvestment grade, from BB+, and assigned it a negative outlook, citing a struggling economy.

To contact the reporter on this story: Chris Christoff in Detroit at cchristoff@bloomberg.net

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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