DETROIT—The Mayor’s Office and the Michigan Department of Treasury have reached an agreement on reform requirements that must be met in order for the City to receive final installments of bond salefunds the State is holding in escrow.
Mayor Dave Bing and State Treasurer Andy Dillon announced on Thursday an agreement that mandates several reforms, including the hiring of a turnaround firm to advise the city on savings and efficiencies and the implementation of a detailed reform program. The reform goals outlined in the agreement must be achieved before the cash-strapped city can receive $30 million held in escrow.
State officials have urged the City to move faster on financial reforms to prevent the city from running out of cash by the end of the year.
The reform deal between Bing and Dillon must be approved by the city council by Tuesday. If the council approves the reforms outlined in the agreement, theState will release $10 million to the city this month.
The city will get another $20 million on December 14 if the city draws up a series of contracts forrestructuring, audits and other actions.
In a meeting last month, Bing and Dillion urged the council to support the reforms in order to receive the $30 million.
In the Oct. 22 meeting, council members said they would not obstruct the agreement.
Council President Charles Pugh said he appreciatedBing’s gesture to reach out and communicate directly with the council. “I love the new olive branch. We are willing participants in the reforms,” he said.
The council will discuss, in a closed session, if the consent agreement between the City and the State still applies after the repeal of Michigan’s emergency manager law, Public Act 4.
Under the consent agreement the State and City formed Detroit’s Financial Advisory Board in place of an emergency manager. The agreement gave the state more oversight of city operations and allowedthe mayor to break collective bargaining agreements with unions in order to save money.
The Michigan Finance Authority sold $129 million in Detroit bonds in August and has already released most of those funds to the City. But the State’s treasury department held back $30 million of the bond sale revenue as leverage to push forward Detroitreforms.
“The funds from the bond proceeds were never intended to fund the status quo in Detroit, but rather aid with its government reforms,” Dillon said in a statement Thursday. “While some progress has been made in the city since the signing of the Financial Stability Agreement in June, it is moving slower than what all parties would have anticipated. There is still much work to be done.”
Bing said the agreement is one that gets everyone on board to move the city out of its ongoing financial crisis.
“The milestone agreement reached between the State and my administration enables all of the key stakeholders to be on the same page as it relates to the progress of the city’s restructuring plan,” Bing said.
City officials project that the city will have a negative cash flow by the end of the year if the state does not release the $30 million withheld.