Governor declares financial emergency in Detroit, could lead to appointment of emergency manager

DETROIT (WXYZ) - During a town hall event Friday afternoon in Detroit, Michigan Governor Rick Snyder declared a financial emergency for the city.

The governor stated that he had reviewed a Financial Review Team report and agreed with their conclusion that there is a fiscal emergency in the city that would likely lead to an emergency financial manager.

“I look at today as both a sad day, a day that I wish would never have happened in the history of the city, but also a day of optimism and promise,” said Snyder.

A ten day appeals process will now begin. That time is meant to give city officials time to request a hearing before an absolute decision is made.

Governor Snyder says he has chosen a top candidate for the emergency financial manager position, but would not reveal the name of the potential candidate.

“There have been many good people that have had many plans, many attempts to turn this around… they haven’t worked. The way I view it, today is the day to call all hands on deck,” Snyder said.

The governor has outlined four reasons why he believes an emergency financial manager would be needed.

First, he says the city overestimated its revenues and spent well beyond its means. Second, he says the city “borrowed massively” to address its deficit and cash flow needs. Third, he says Detroit’s long-term debt has ballooned out of control and could reach up to $14.99 billion. The fourth reason deals with a projection that the city would have a cash deficit in excess of $100 million by June 30, 2013.  

“It's not just about numbers, though," he explained. "The people of Detroit deserve to have someone respond when they call 911, to have the lights on in the streets, to feel safe when they send their kids off to school in the morning. With the trouble Detroit has had in balancing its budget, city services have fallen short, and the quality of life has suffered.”

The Detroit City Council plans to meet following the announcement to discuss their plans.

Friday morning, council requested a meeting with Mayor Bing, but he suggested council wait until after Governor Snyder’s announcement. Council was working on a revised consent agreement with additional milestones rather than the appointment of an Emergency Financial Manager.

At least one council member - Joann Watson - has discussed the option of a lawsuit challenging the takeover law that was repealed by voters in November.

State officials say the takeover authority reverted back to the previous law, Public Act 72.  And a new law was passed by the lame duck Legislature in Lansing that goes into effect on March 28.

This morning,  a tweet posted from the account of Detroit Mayor Dave Bing  read, "it's going to take more than Detroit to fix Detroit. We are all in this together."

Thursday, Snyder spoke by phone with Detroit Mayor Dave Bing.  After the call, Bing spoke to reporters and said, "Everybody's got a pretty good idea of what the announcement is going to be."

Last week, Governor Snyder said he would take a week or so to make his final decision on what he would do with the city of Detroit. At that time he said he would either appoint an emergency financial manager or enter into a new consent agreement with the city.

Those remarks came after a financial review team found that a financial emergency existed in the city of Detroit. The review team also recommended to Snyder that he appoint an emergency financial manager to run the city.

Detroit has been operating under a consent agreement with the state since last year. That consent agreement prevented the city from being taken over by an emergency manager, who would have been appointed under a state law that was in place at that time.

Voters overturned that law in November 2012 and the state reverted to an older law that allowed for the appointment of an emergency financial manager.