Bloomberg News

Detroit Plan Would Put City Under Board to End Deficits

March 30, 2012

Detroit (9845MF:US)’s City Council took its first look yesterday at Michigan Governor Rick Snyder’s revised plan to stave off bankruptcy by putting the city under a nine- member panel charged with ending deficits within five years.

Among the powers the 43-page proposal conveys to the board, to be named by Mayor Dave Bing, Snyder and the council, is the authority to force city unions to accept 12 provisions in new contracts, including putting new hires on 401(k)-like plans.

Several council members faulted the plan, which was drafted with Bing’s input, although he hasn’t fully endorsed it. Councilwoman JoAnn Watson said it wouldn’t provide enough state aid and that it attacks unions’ collective bargaining power.

“It’s not a partnership, it’s a takeover,” Councilwoman Brenda Jones said yesterday at a meeting to review the proposal. Bing and the council rejected an earlier version from Snyder.

Among the provisions that unions would be forced to accept under the plan from Snyder, a Republican elected in 2010, are the elimination of so-called bumping rights, merit-based promotions, changes in work rules to lower costs and letting the city hire contractors to provide more services. The changes would take effect after current contracts end in June.

Unions representing about 6,000 of the city’s 11,000 employees have ratified wage and benefit concessions negotiated with Bing. The council hasn’t approved the revised contracts.

$270 Million Deficit

Michigan’s biggest city and the home of General Motors Co. (GM:US), the world’s largest automaker, may have a $270 million deficit by the end of June, according to a council report in February. State Treasurer Andy Dillon said Detroit’s cash will run out in May. Detroit and Snyder have until April 5 to agree to a recovery proposal, or the governor can name an emergency manager with sweeping powers over municipal finances and operations.

The plan lets Bing and the council keep their powers under the city charter. If the agreement or the board’s financial instructions aren’t followed, Sndyer could appoint an emergency manager who would be permitted to cut costs, fire workers, nullify contracts and assume the power of the mayor and council.

Among the criticisms voiced by four of the nine council members was that the latest proposal usurps their power as elected officials. A majority must approve the plan before it can take effect. There were no votes taken on it yesterday.

State Senator Bert Johnson, a Highland Park Democrat, urged the council to reject the proposal, saying that payless paydays for city workers would force the state to be more willing to give the city money that it’s owed.

No Bailout

Snyder has said the state won’t bail out the city with cash, while letting it borrow $137 million to avoid running out of money to cover its payroll by May. Bing and council members have complained that the state reneged on more than $200 million in revenue sharing funds.

Bing, who remains hospitalized to recover from abdominal surgery performed March 24, praised the plan’s goals in a statement sent from his office. He said it includes state aid, such as helping the city to collect unpaid income taxes, and preserves his and the council’s authority to solve Detroit’s fiscal crisis over time.

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

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


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