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Evans wants chance to fix Wayne Co. finances

Christine Ferretti, and Candice Williams

Detroit — Executive Warren Evans’ hopes for a consent agreement to fix Wayne County’s finances advanced Tuesday when an independent review team concluded a financial emergency exists in the county.

By law, Gov. Rick Snyder now has 10 days to weigh the report and make his own determination of a financial emergency. If Snyder confirms the finding, county commissioners eventually can vote for one of four options for state intervention: a consent agreement, which sets benchmarks the county would have to accomplish; mediation; an emergency manager; or Chapter 9 bankruptcy.

Evans favors the consent agreement, which would likely spell out specific budgetary reforms the county would have to accomplish.

In a statement Tuesday, Evans said the team’s findings validate the work his administration has done to “reveal the true financial status” of the county.

“Our $52 million structural deficit in Wayne County is real and unless we solve it now, it will continue to grow year after year,” Evans said. “While we have already taken several significant steps forward to stop the debt from accumulating, there is still much work to be done.”

“As we move further along in the process to secure Wayne County’s future, I want to be clear that we have a plan that allows us to solve our own problems and we have a responsibility to use the tools available to us to get it done.”

The city of Detroit tried a consent agreement approach in April 2012, but less than a year later Snyder appointed an emergency manager who took the city through bankruptcy.

The recurring shortfall in Michigan’s most populous county stems from the underfunded pension system and a $100 million yearly drop in property tax revenue since 2008. Its accumulated deficit is $150 million.

Earlier Tuesday, Evans appeared before Detroit’s City Council, telling members that he remains confident the county will resolve its challenges without emergency management or bankruptcy.

“We’re working very hard to get this budget situation straightened out,” Evans told council members earlier Tuesday morning during a brief address at City Hall. “There is no way I would foresee Wayne County needing an emergency manager or bankruptcy at this point.”

One county employee union leader said he was not surprised by the review team’s finding, but is wary of a consent agreement.

Al Garrett, president of the American Federation of State, County and Municipal Employees Council 25, said Tuesday he’s concerned a consent agreement will allow the county to void the Public Employee Relations Act and impose contracts without the benefit of bargaining.

“It’s kind of ironic you’re talking about a budget as large as Wayne County is it took less than 60 days to review the books,” Garrett said. “When you think about the many departments and agencies the county has, amount of time it would take to drill down ... the deal that Warren (Evans) wants is for the employees to make up that difference.”

Garrett said the union continues to meet with the county to work through a contract.

“We’re trying to put in things that could save the county money,” he said. “Things that wouldn’t put Draconian cuts in place that he’s asking for ... I’m hoping that we will be able to sit down and work out a contract recognizing there has to be sacrifices from the AFSCME membership, but that those sacrifices should be shared.”

The review team, appointed July 2 following a preliminary review requested by Evans, conducted several meetings to consider the county’s finances and interviewed elected officials, department heads and union leaders, officials said.

The review team also conducted a public information meeting with county residents, as required by law.

The team’s report indicates that numerous conditions led to the determination that a financial emergency exists in the county. Those conditions include:

■ The county’s last four annual financial audits revealed notable variances between General Fund revenues and expenditures as initially budgeted, as amended, and as actually realized. In addition, county officials underestimated actual expenditures in three of the fiscal years by amounts ranging from $16.7 million to $23.7 million.

■County officials engaged in unbudgeted expenditures in violation of Public Act 2 of 1968, the Uniform Budgeting and Accounting Act.

■Although there was agreement among county officials that existing detention facilities are inadequate, there is no consensus about whether to complete construction on a new jail or to renovate existing facilities.

■According to the county executive’s recovery plan, unfunded healthcare-related liabilities were estimated to be $1.3 billion as of the last actuarial valuation with funding set aside for this purpose of less than 1 percent of liabilities. Healthcare-related liabilities represent 40 percent of the county’s long-term financial obligations.

Dearborn Mayor Jack O’Reilly said Tuesday that the county’s finances are cause for concern. During the past few years, the city of Dearborn has had to pick up some of the services the county has been slow to maintain, such as grass-cutting, he said.

“It’s going to affect everyone,” O’Reilly said. “Obviously when money has to be diverted ... it’s not available for other things.”

Allen Park Mayor William Matakas said he expects the county to have a difficult time working through its finances.

“They don’t have a lot of assets they can raise cash from to get themselves out of the hole,” he said. “When you look at the county’s situation, I don’t think they’re going to have a lot of big supporters to come to their aid like they did in the Detroit situation ... The big problem is how do they solve the legacy problems that are severely underfunded? Will retirees voluntarily agree to concessions? That won’t be easy.”

Wayne County is struggling with $4.5 billion in long-term financial obligations. Officials for the county have also said they need the consent agreement to help address its vastly underfunded pension system.

Evans this month submitted a balanced budget of $1.55 billion to the Wayne County Commission for its approval.

The budget — down from the current year’s $1.68 billion budget — covers Oct. 1, 2015, through Sept. 30, 2016. Evans also said he has submitted a projected 2016-17 budget of $1.46 billion.

Evans on Tuesday also referenced the county’s failed jail project.

“Without a balanced budget and our bond rating, I can’t do anything about it,” he said. “Whatever it’s going to take, it’s going to take more money.”

The executive told council members that he’s confident the county will be OK, as long as it makes progress on its structural deficit.

“There’s significant liabilities out there, but if we get rid of the structural deficit soon, we’re on a path to have a balanced budget to have our credit rating upgraded.”

cferretti@detroitnews.com