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Detroit Struggling To Avoid State Financial Takeover

The state of Michigan is poised to take over the city of Detroit’s struggling finances if the mayor and City Council can’t find a way to work together in devising a plan to reduce the city’s budget deficit on Tuesday.

The state is poised to assume total control of the city’s finances if they can’t overcome the bitter political gridlock that is threatening the city’s future.

Detroit has struggled mightily in the wake of a mass population exodus to the suburbs. The massive loss of revenues and the poor financial management has left the city unable to even meet payroll for the next few months without state help.

Moody’s Investors Service, the rating agency, recently lowered Detroit’s rating well below junk status as the city now faces at least a $40 million budget shortfall.

Michigan State Treasurer Andy Dillon says it’s likely the only real option is to appoint an emergency financial manager with sweeping powers to gut contracts and sell assets.

“The cash situation is going to be very difficult for the city to reverse,” he told NPR. “I think that they’ve gotten so far down the path that you’re just not going to find a big cash solution here quickly.”

The state already controls the finances in nearby cities near like Flint and Pontiac.

To avoid that scenario, some tough choices will need to be made to make ends meet.

Sean Hendricks knows as much, and that’s what has him so concerned while at Detroit’s Butzel Family Center. Hendricks knows the city has to cut costs, and the recreation center of which he’s so fond could well be one of the casualties.

But he remains hopeful.

“A lot of seniors go to these places, especially in the summertime,” he said. “When it is hot outside, they can come in the Center and stay for a little while and keep cool. Everything’s falling down little by little.”

But Detroit Mayor Dave Bing says there remains a way out if the City Council passes a number of his proposals, including the elimination of roughly five percent of the total workforce.

But the lack of collaboration in city government has been part of the problem and has left Bing, a former NBA legend and Hall of Fame basketball player, clearly frustrated.

“I’ve taken things to City Council over time and they have not been able to respond as fast as I would like them to so that we can start the implementation plan,” he says.

But the Council’s second-in-command, Gary Brown, says the mayor has been part of the problem because of his reluctance to cut deeply.

“The Council asked the mayor to cut the budget for the last two years — $100 million each year — and he refused to do it,” Brown says. “And until we have the political will, we’re going to be in this situation and have an emergency manager come in – a dictator – where the mayor doesn’t have a function, the Council doesn’t have a function, there’s just one person calling the shots.”

The city could eventually file for bankruptcy, but the impending budget cuts are sure to hurt no matter what decision city leaders eventually choose.

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