Detroit Getting Closer to Exiting State Oversight

by San Antonio Attorney

Detroit is making significant recovery from bankruptcy, according to the state commission overseeing the finances of the city.  It was declared that the city meets the requirements to emerge from municipal bankruptcy.  This would be a step toward concluding state supervision.

The announcement was made after the 2014 to 2015 budget of the city was audited.  Detroit has to obtain the same result for its subsequent 2 fiscal years so that it can exit from oversight at the earliest in 2018.

Mayor Mike Duggan said in an interview that they have been certified as being completely compliant with the requirements of the law.

Detroit has stated about $1 billion in excess of budget in recent years, and the local government also foresees an evenhanded budget for the next fiscal year.  If Detroit follows its budget, and a review is certified in the year 2018, the city could do away with direct oversight and enter a period when the monitoring would be generally latent.

If that happens, Detroit will have the freedom to function without asking for the permission of the review commission on affairs related to labor agreements, contracts and budgets.  But there are still remaining long-term risks, such as a $490-million deficit in pension funds that must be paid in the years to come, as well as unexpected disasters like an economic recession.  If the city suffers a shortfall before the year 2018, it may have to start over with the three-year duration of close monitoring by the review commission.

Detroit filed for Chapter 9 bankruptcy in 2013 stating over $18 billion in liabilities, the largest in the history of municipal bankruptcy in the United States.  At that time, the services provided by the city was in a fiasco.  By December 2014, Detroit emerged from bankruptcy with a plan to use funds from the state, Detroit Institute of Arts and foundations to save the museum from insolvency and minimize cuts to pension benefits.

Leave a Comment

Previous post:

Next post: