DETROIT -- Mayor Dave Bing said Wednesday that he expects to impose unpaid furlough days on city workers and other cost-saving actions Jan. 1 to make up for at least $10 million the city won't get to bolster its cash flow.
Bing said the cuts are necessary because the City Council failed to approve a contract called for under Detroit's fiscal overhaul plan.
The council voted 8-1 Tuesday to delay action on a $300,000 contract for the Miller Canfield law firm to advise Bing on financial matters.
The city's top lawyer told the council the contract could be a conflict of interest because Miller Canfield wrote milestone agreements in Bing's reform program. Some on the council questioned whether the contract was legal under the city's charter because it was neither prepared nor approved by the city's chief on-staff lawyer.
Detroit has struggled with its finances for many years as the city's population has dwindled and the automotive industry that once drove economic activity in the Motor City has diminished.
The city of 700,000 has been criticized by state officials for slow progress on financial reforms. It needs the money to avoid running out of cash by the end of the year. The Michigan Finance Authority raised $137 million for Detroit earlier this year through a debt sale. While Detroit received some of that money, Michigan Treasury officials tied another $30 million to Detroit's progress on reforms.
The state says Detroit won't get $10 million in bond money due Tuesday. And $20 million due to Detroit next month also is in danger.
"If the milestones are not completed, the funds will not be released from escrow," Caleb Buhs, spokesman for the Michigan Treasury Department, told Reuters.
"The actions Detroit must take for the treasurer to release the funds from escrow were clearly established in the Memorandum of Understanding, sent to the mayor and city council last week," Buhs said.
City Council President Charles Pugh blamed Bing for the setback. "Why is Mayor Bing putting the city's finances at risk by marrying himself to one law firm?" he told reporters, adding he wants to meet with the mayor this week to choose a law firm that the council can accept.
Projections presented by city officials to Detroit's oversight board earlier this month showed the city's weekly cash flow at just $4.1 million in mid-December before dropping to a negative $4.8 million at the end of the year.
Detroit's financial advisory board was created under an agreement that allowed Detroit to avoid the appointment of an emergency manager to run the city while giving the state some oversight and allowing the mayor to disregard collective bargaining agreements with unions.
The city council did approve on Tuesday a contract with Ernst & Young to provide cash-flow analysis for 2013. This was another condition set in the deal with the state.
Pugh said the council had previously approved a contract with consulting and actuarial firm Milliman for pension services, which was also a condition of the deal. While the council is officially scheduled to be in recess until early next year, Pugh said it could come back in a special session at any time.
Also on Tuesday, the council rejected a nearly $48 million contract with St. Paul-based EMA Inc to run some of the city's water and sewer department.
Detroit faced a cash crisis this summer that led to warning it could default on some bonds. The cash crunch and default were averted by the bond sale.
This article includes reporting by The Associated Press and Reuters.
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