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Detroit Will Run Out of Money before End of the Year

The city of Detroit will run out of money before the end of the year if it continues on its present course, after the Detroit city council last night was unable to complete the actions stipulated by the Michigan Treasury in order for it to get a cash infusion of $10 million yesterday and another $20 million in three weeks.

The state of Michigan announced last week that it would send the $30 million to Detroit if it made several moves that would begin the process of overhauling its finances. Detroit’s finances have been in a state of emergency for years as a dwindling population—once the nation’s fourth largest city, Detroit lost a quarter of its population in the last decade alone, leaving it with fewer than 714,000 people—and the shrinking of the local auto industry has drastically reduced tax revenues.

One of the actions stipulated by the state was to hire a law firm to provide legal advice and handle litigation connected to the financial stability agreement designed to fix city finances. But council members were upset that Mayor Dave Bing presented them with just one law firm, Miller, Canfield, Paddock & Stone, which they believe has a conflict of interest because it handles other city business. So by a voice vote, the council rejected the $300,000 contract with the firm.

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.

“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.

While the Michigan Finance Authority raised $137 million for Detroit earlier this year through a debt sale, the state tied the receipt of $30 million to Detroit’s progress on reforms.

“If the milestones are not completed, the funds will not be released from escrow,” Caleb Buhs, spokesman for the Michigan Treasury Department, said to Reuters.

“The actions Detroit must take for the treasurer to release the funds from escrow were clearly established in the Memorandum of Understanding, sent to the mayor and city council last week,” Buhs said.

According to the numbers presented by city officials to Detroit’s oversight board earlier this month, the city’s weekly cash flow will hit $4.1 million in mid-December before dropping to a negative $4.8 million at the end of the year.

But council member JoAnn Watson, near the end of the long meeting, had her own interpretation of the state mandate. She said she believes the council met the terms of the agreement by simply voting on the matter.

“That milestone agreement said ‘vote on Miller-Canfield.’ It did not say approve,” Watson said. “We have not violated that agreement.”

The council also voted on Tuesday to reject a controversial proposal that would have cut the number of water department employees by some 80 percent, from 1,978 to around 375, over five years.

The plan would have reduced the union workforce, outsourced work and increased the number of contractors. City officials said it could save about $139 million annually but union members said such severe cuts would put water quality in jeopardy for the 4.3 million people connected to the city’s water supply.


What people are saying

16 thoughts on “Detroit Will Run Out of Money before End of the Year

  1. Anonymous says:

    ask Romney what America should do.

    1. Idonwanna Tellya says:

      Hey, why doesn't Detroit do what Obama thinks will grow the economy – tax the rich, tax businesses and hand out more food stamps. I'm sure what businesses that are left in Detroit have PILES of cash just sitting around in mattresses… Isn't that what you libs think? Or is this why so many businesses have left Detroit?

      You could also tax the "big evil corporations" like GM, Chrysler and Ford. At least until Obama has to hand them taxpayer money again.

      Better yet, use the piles of cash unions have. They have plenty – just look at how much they gave to the Dem party last year… Heck, the Teamsters alone gave Democrats nearly $4 Million in 2011. Why don't they just hand it over to the City of Detroit?

      Your comment says a lot about your complete lack of economic intelligence. In your world, a lawyer is better at making business decisions than a proven business person. Dumbass.

    2. Anonymous says:

      Sore loser!

    3. Anonymous says:

      Charles Kreuzer you lost already! give it up! … besides, the comment was pointing at Romney's insistence that he knew what was best for Detroit, and that he cared about Detroit… so where is he, now?

    4. Larry Kelly says:

      michflaguy I find it interesting you can't/won't respond to Charles comment other than to say "Sore loser". He is stating the obvious, the only way out of this is economic prosperity. Take a moment to look at how Bill Clinton balanced the budget, then you might understand.

    5. Hazel B says:

      ask Obama what he wants to do, he was the one coming here making lying promises, don't you remember all the autoworker ads during the election…..i sure do, everyday he was even wearing a hard hat…lmfao about Obama and the Detroit autoworkers….the casinos are rolling in the does…..

  2. Hazel B says:

    Why not use an honest Detroit lawyer?

  3. Hazel B says:

    Actually $300,000.00 was a bargain from Miller, Canfield…

  4. Todd Andrew Fiedler says:

    Detroit's insolvency is only fitting, given that Detroit was an Obama stronghold, since it is primarily entitlement scabs that live there.

  5. Wallace Freeman says:

    Does Detroit look a lot like the Obamunist vision for the US or does the Obamunist vision for the US look a lot like Detroit?

  6. Anonymous says:

    So let's just clarify…the city refused to pay a law firm $300,000 and in doing so will lose $10,000,000? Well…now it is obvious why Detroit is in financial failure – THESE idiots are making the decisions! Here's an idea…fire the City Council and use the $$ saved from their salaries to pay the law firm so the city can get the $300 million!

  7. Anonymous says:

    So let's just clarify…the city refused to pay a law firm $300,000 and in doing so will lose $10,000,000? Well…now it is obvious why Detroit is in financial failure – THESE idiots are making the decisions! Here's an idea…fire the City Council and use the $$ saved from their salaries to pay the law firm so the city can get the $10 million!

    1. Larry Kelly says:

      The point isn't should they pay 300k to get 10M. The point is, the city is broke. Understand that the 30M will just be sent down a rat hole, keeping a few city workers (who are not needed) employed for a few more months.

    2. Anonymous says:

      Let me clarify: Detroit city council refused to hire the sole law firm presented by Mayor Bing on the grounds that said law firm already has city legal business. I'm thinking city council wanted a law firm not already connected to corrupt Detroit politics.

  8. Anonymous says:

    The problem here is that the mayor wanted the same firm of attorneys to be the ones to overhaul the issue. The other members felt with some justification that perhaps the present firm of attorneys are part of the issue. He should have come up with alternatives, in fact no public contract should be given out without some form of competition.


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