Wayne County completed a consent agreement with the Michigan Department of Treasury, moving the home of Detroit a step closer to state oversight in a bid to mend its finances.
The pact, which keeps local officials in charge, is an alternative to bankruptcy and becomes effective after the 15-member county commission approves it, according to an e-mailed statement Tuesday from the office of County Executive Warren Evans. The commissioners received a copy of the 12-page agreement, according to the statement.
Once it is approved by the commission and signed, the county executive’s office has 30 days to keep negotiating with unions before Evans can use his powers under the pact to impose pay or benefit cuts. Evans has said he wants to work with the county’s nine unions, which have expired contracts, to find solutions.
The state oversight will help the county cut costs to fill its annual deficit of $52 million and work to manage a pension system that is less than 50 percent funded. The fiscal woes of Wayne demonstrate the remaining stress in the region of once-bankrupt Detroit. Three other Michigan municipalities and two school districts are operating under consent agreements.
The arrangement does limit the county’s autonomy. Wayne officials can’t issue debt or sell county assets valued at more than $50,000 without approval of state Treasurer Nick Khouri. The county must make timely debt payments and can restructure debt even though that’s subject to approval of state. The county can’t file for Chapter 9.
Per the terms, the county must provide a plan on how to address the projected needs of its adult detention system by Jan. 31, 2016. Wayne issued $200 million of bonds in 2010 to build a jail in downtown Detroit that remains unfinished because of cost overruns. The facility drains $14 million a year in debt service from county’s coffers.
A portion of the $143 million outstanding of 10 percent jail bonds traded Tuesday at an average of 84.3 cents on the dollar to yield 12 percent. That’s down from an average of $1.10 in January, when the yield was 7.8 percent. The federally taxable debt, the most-traded Wayne security on Tuesday, matures in December 2040.