Detroit's financial condition is deteriorating more quickly than projected, and without an infusion of money from the state, the city could run out of cash by mid-December, a top city official told the board that has significant oversight of the city's finances.
But William (Kriss) Andrews, the program management director overseeing Detroit's massive overhaul of city government under a financial stability agreement with the state, backed away from warnings that the city would be broke by next month.
He said he believes the city will meet crucial benchmarks the state is requiring before it will release money from bond sales -- $10 million this month and $20 million in December -- that will keep the city solvent in the short term.
But the city's long-term fiscal health is less certain. Andrews, speaking Monday before the joint city-state Financial Advisory Board, said the city's tax revenues did not come in as high as he had anticipated last month, dropping by $18 million. That and other new figures he outlined painted a dire and worsening picture as Detroit struggles to turn around enormous deficits and long-term debt.
Without the money from bond sales, Detroit would be $3 million to $5 million in the red by mid-December, possibly triggering furloughs, payless paydays or other drastic steps for city employees. And by June 30, the end of the city's current fiscal year, Detroit would be short by nearly $47 million in cash to pay its bills.
The city's cash-flow crisis is "more challenging than it's ever been and more challenged than we reported last month," Andrews said, adding that the city will need to find new revenue sources, a difficult proposition even in good times.
Andrews blamed rising medical expenses and lower receipts from taxes and other revenue sources.
"The cash position for the city is more critical than it was a month ago," Andrews said. "We've got to deal with this problem."
Andrews spoke at the monthly meeting of the advisory board, the panel's first meeting since Michigan voters repealed the state's emergency manager law, Public Act 4, a week ago.
The repeal gutted the state's toughest methods for forcing changes on troubled cities and school districts: Public Act 4 gave state emergency managers the power to strip control from local elected officials and toss out union contracts for government workers.
The city and state sold $137 million in bonds to refinance debts and restructure government, but the state is holding in escrow about $80 million of that money. The city won't get the funds unless it meets certain benchmarks.
Crucial to meeting those targets in the next couple of weeks will be two decisions by the Detroit City Council. The state wants the council to approve new contracts for the accounting firm Ernst & Young for fiscal analysis and for the law firm Miller Canfield for legal advice for Mayor Dave Bing's administration on consent-agreement issues.
Bing's hiring of Miller Canfield has been a hugely contentious issue for months for the council because of the firm's role in writing the state's emergency manager law and advising Bing as the state gave city officials a bitter ultimatum: Accept a fiscal stability agreement that preserved city officials' jobs but gave the state major oversight of city finances, or risk a state-appointed emergency manager.
