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Source: Governor to recommend emergency manager for Detroit

By Poppy Harlow and Greg Botelho, CNN
March 14, 2013 -- Updated 2211 GMT (0611 HKT)
STORY HIGHLIGHTS
  • A state report said Detroit's government lacks an adequate plan to resolve $14 million in debt
  • Michigan's governor earlier said the state will take over the city government's operations
  • He'll recommend a Washington lawyer be Detroit's emergency manager, a source says
  • Detroit's mayor cedes the financial woes, but says his team has a plan to address them

(CNN) -- Michigan Gov. Rick Snyder will recommend that a Washington attorney become Detroit's emergency manager, a source close to the governor said Wednesday.

At 2 p.m. Thursday, the governor is expected to publicly recommend attorney Kevyn Orr step in to help Detroit manage its challenging financial situation, the source said. Members of Michigan's Local Emergency Financial Assistance Loan Board would make the official appointment.

The governor said earlier this month that Detroit lacked an adequate plan to resolve its $14 billion debt and that he would invoke a state law to appoint a manager to assume control of the city's government.

Detroit's City Council voted days later to challenge the move. And the city's mayor, Dave Bing, said in a March 6 statement that he also opposes the appointment of an emergency manager -- though he won't fight the move.

"We need to end the drama and infighting and understand that, whether we like it or not, an emergency financial manager is coming to Detroit," Bing said in a statement.

In fact, the mayor said his office will work with the state and financial manager "to move our key initiatives forward" and work toward removing "the need for an emergency manager in the required 18 months."

"Otherwise, it will be a more elongated and painful process," Bing said.

After a harrowing few years marked by bankruptcies and federal bailouts for General Motors and Chrysler Group, the U.S. auto industry long associated with the city has rebounded of late. But that has done little to help Detroit's finances.

A state review board issued a report last month saying the city faces a cash shortfall of more than $100 million by June 30, and that long-term liabilities -- like unfunded pension liabilities -- exceeded $14 billion. Detroit's government has been borrowing to continue operations and would have fallen nearly $1 billion short last year if it hadn't issued new debt.

On March 1, Snyder announced his decision that set the stage for the appointment of an emergency manager, which has happened previously in the Michigan cities of Flint and Pontiac.

A step short of bankruptcy, the move gives the emergency manager many of the same powers as a bankruptcy judge. It could mean throwing out contracts with public employee unions and vendors that the city can't afford, and could spur cutbacks in already depleted city services.

"I don't view it as a takeover," the governor told CNN. "It's really about bringing about more tools and resources to help Detroit."

In a video statement posted online Tuesday, Bing did not dispute that the city is in a financial crisis. But he did deem "categorically incorrect" the assertion that "my administration does not have a ... plan to resolve the situation."

That strategy involves "revenue enhancements" of $50 million, cost reductions, including employment savings of $100 million, and measures aimed at improving the quality of life in the city.

"We developed a comprehensive and aggressive restructuring plan to address the financial issues facing the city," Bing said. "Our plan was reviewed and accepted by all the city's stakeholders, including the state and the financial advisory board. Since then, we have been consistently executing our plan."

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