Without deeper budget cuts, Detroit is sure to run out of money, says its financial watchdog

Lisa M. Collins:

With a dwindling tax base, a recalcitrant union work force, and pension and health care benefits it cannot afford, Detroit is running out of money and will not be able to pay its bills if major changes aren't made, according to a report released Thursday by Detroit Auditor General Joe Harris.

"The truth is that Detroit's treasury is hemorrhaging," said Harris, whose 10-year term as an independent city auditor appointed by the City Council ends in November. "Insolvency is certain. The only question is the timing."

Detroit Finance Director Sean Werdlow recently told the City Council that Detroit could run out of cash as early as December. That same day, Mayor Kwame Kilpatrick told the council that if the unions did not agree to contract concessions by Monday, he would announce layoffs.

The city is spending $15 million more a month than it brings in, Harris' report says. Most of these costs are in salaries and benefits.

Insolvency would mean that Detroit would not be able to pay workers and contractors on time. If payroll, medical benefit or bond payments are late, the state government would have to consider appointing a financial manager to oversee the city's finances, as Michigan has done in Hamtramck and Ecorse.

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