Panel to vote on Detroit’s release from state oversight
Detroit — More than three years after emerging from the largest municipal bankruptcy in U.S. history, the city on Monday is expected to regain local control over its finances.
The state’s financial review commission will meet at 1 p.m. to vote on a waiver that would end state oversight. If the waiver is approved, the commission will no longer have to sign off on contracts and budget changes in Detroit, said Ron Leix, spokesman for the Michigan Department of Treasury.
After posting three consecutive budget surpluses, Detroit met a major threshold required to exit oversight from the commission, Leix said. “It’s a very big accomplishment,” he said.
Detroit ended the 2017 fiscal year with a $53.8 million general fund operating surplus and revenues exceeding expenditures by $108.6 million. The city ended the 2016 fiscal year with a $63 million surplus. For 2015, the surplus was $71 million.
State law still requires the financial review commission to meet each year to grant Detroit a waiver to continue local control.
“After granting waivers for 10 consecutive years, that’s when the FRC can dissolve,” Leix said.
Mayor Mike Duggan has acknowledged the nine-member financial review commission would not entirely end but go into a “dormancy period.”
“They do continue to review our finances, and if we in the future run a deficit, they come back to life, and it takes another three years before we can move them out,” Duggan said in February when he rolled out a $2 billion budget plan.
The mayor last year blamed state oversight for gumming up the works in Detroit because all major city and labor contracts are delayed 30 days waiting for approval from the state.
City and state officials have predicted for months that Detroit would emerge from state oversight this spring. Duggan credited his administration and the City Council with getting Detroit’s finances back in order.
Chief Financial Officer John Hill has said the city showed vast improvements in its financial health with state oversight.
“It’s been a real constructive process where the city has excelled,” Hill said earlier this year.
The city filed for bankruptcy in the summer of 2013 and officially exited on Dec. 10, 2014, with a plan to shed $7 billion in debt and pump $1.7 billion into restructuring and city service improvements over a decade.
In approving a deal that would be known as the “grand bargain,” which helped pave the way for the city to exit bankruptcy in December 2014, Michigan legislators required that a financial review commission oversee the city’s finances, including budgets, contracts and collective bargaining agreements with municipal employees.
The commission was established as a condition of a financial aid package approved by the state Legislature to defray cuts to Detroit retiree pensions and shield the Detroit Institute of Arts collection from bankruptcy creditors.
The funding plan also relieved the city of most payments to its two pension funds through 2023.
But in 2024, the city will have to start funding a substantial portion of the pension obligations from its general fund for the General Retirement System and Police and Fire Retirement System.
Kevin Kubacki, executive director of the Financial Review Commission, sent a Dec. 1 letter to Gov. Rick Snyder, attributing the city’s financial rebound to “unfilled vacancies” in city government and “revenues trending above the adopted budget.”
Kubacki noted the city has established a 10-year budget forecast, calling it “an important tool to ensure that long-term obligations are monitored and that short-term decisions are made in the context of appropriately balancing the city’s many funding needs.”
Earlier this month, Snyder signed an order to release Flint from receivership and state oversight. The governor put the city under state emergency management in 2011, sidelining the mayor and council.