Cash-strapped Detroit approves debt rescue plan

By John Wisely, USA TODAYUpdated 26m ago Comments

DETROIT – This cash-strapped city reached a deal Wednesday evening to restructure its debt and overhaul operations to avoid having a state-appointed manager take sweeping control of Detroit's struggling finances.

The City Council voted 5-4 to accept the contentious agreement.

Mayor Dave Bing and Republican Gov. Rick Snyder are set to sign the agreement that allows the city to dodge today's deadline that would have allowed the governor to appoint an emergency manager.

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The debt restructuring could provide the city with $137 million in cash in coming months to avoid payless paydays and missed bond payments. It also means additional concessions from city workers will be needed to balance the budget.

Detroit has a $200 million budget deficit and $13.2 billion in long-term structural debt.

The deal leaves the mayor and City Council in charge of day-to-day operations but also creates an oversight board to prevent overspending. Bing and Snyder will appoint a new chief financial officer and another executive to restructure city government.

If the City Council had rejected the plan, state law called for the governor to appoint an emergency manager. That law is under attack in the courts and through a ballot initiative aimed at repealing it.

"It's an assault and a slap to the citizens we represent to even vote on this," said Councilwoman JoAnn Watson, who voted no on the plan.

But Deputy Mayor Kirk Lewis called it a pivotal moment in Detroit's history. "It is time now to begin the monumental task of stabilizing Detroit's financial operations, which is and has always been the mission of Mayor Bing and his administration," Lewis said.

Bing, an NBA Hall of Famer turned politician, wasn't present for the council vote because he was hospitalized Wednesday for treatment of a perforated colon. Bing had been released from the hospital Monday after a nine-day stay.

The city's financial problems are decades in the making, tied largely to retrenchment in the domestic auto industry and population loss. From 2000 through 2010, the city's population shrank by 25%.

As part of the deal, Bing agreed not to submit to the City Council recently ratified union contracts, which call for concessions from city workers. Snyder said the contracts don't save enough money.

Cash-strapped Detroit approves debt rescue plan