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Detroit workers face unpaid leave Jan. 1

REUTERS
Detroit Mayor Dave Bing has struggled to get austerity measures past the city council. REUTERS

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By Reuters
Thursday, Nov. 22, 2012, 7:50 p.m.
 

DETROIT — Detroit plans to put workers on unpaid leave starting Jan. 1 to prevent the city from running out of money if its council continues to balk at reform measures and the state blocks the release of much-needed funds.

The furloughs and other cost-cutting measures outlined by Mayor Dave Bing and top city officials this week aim to offset $30 million that Michigan is withholding from the city unless certain conditions are met.

“These actions are necessary to keep the city from falling into further financial distress,” Bing told reporters.

Although the mayor said public safety services won't be adversely affected, details on the furloughs aren't available.

The nine-member City Council has resisted some of the measures to restore Detroit's fiscal health sought by the state and agreed to by the mayor. Earlier this year, Detroit reached a consent agreement with Michigan that gave the state some oversight and allowed the mayor to disregard collective bargaining agreements.

The Motor City, though, has been criticized by state officials in Lansing for slow progress on its financial reforms.

Detroit City Council on Tuesday rejected one of the conditions for the state's transfer of an initial $10 million — the proposed hiring of law firm Miller Canfield Paddock & Stone to help with legal issues related to the financial stability deal with the state. The rejection raises the risk of Detroit running out of money by the end of the year.

Projections presented this month by city officials to an oversight board in charge of Detroit's finances show the city's weekly cash flow at just $4.1 million in mid-December and on course to drop to a negative $4.8 million a week at the end of the year.

Jack Martin, the city's chief financial officer, said the scenario won't happen again.

“The mayor, the administration is planning to implement additional cuts to ensure that the city won't run out of money,” Martin said.

Officials said the city won't miss any payments on outstanding debt. A cash-flow crisis earlier this year led Detroit to warn it could default on some bonds. The default was averted by the sale of new debt that raised $137 million for the city. Michigan has released some of that money to Detroit, with $30 million tied to specific conditions for the release of $10 million this week and $20 million on Dec. 14.

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