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Warning signs


A state takeover of Detroit’s financial affairs is not only undesirable, but anathema to all involved, both for practical and political reasons. But as time goes on, with very little progress in addressing the city’s budget deficits in any meaningful way, that specter looms larger and larger.

Although it has not yet happened, the receivership progress can be triggered by one or more 14 conditions. If:

• The city asks for a preliminary review of its budget problems.

• A creditor with an undisputed claim is not paid for six months past due. The amount must be $10,000 or 1 percent of the city’s annual general fund budget, whichever is more.

• A number of registered city voters, equal to 10 percent or more of the total number who cast ballots in the last governor’s election, petition the state treasurer to look into “specific allegations of local government financial distress.” This may not be done within 60 days before any city election.

• The trustee, actuary or at least 10 percent of city pension beneficiaries notify the state that the city is late in making its legally required minimum payment to the fund.

• The city is at least a week behind in paying its employees.

• The city defaults on a bond payment or violates one or more bond covenants.

• Either the state House or Senate asks for a review of the city’s finances.

• The city violates an order related to any law governing the issuance of bonds or notes.

• The city violates the conditions of an order issued under the emergency municipal loan act.

• The city violates certain provisions of the uniform budgeting and accounting act.

• The city fails to file or institute a deficit recovery plan.

• The city doesn’t file an annual financial report or audit that meets minimum state budgeting and accounting requirements.

• The city is delinquent in paying out tax revenues collected for another taxing jurisdiction, and that jurisdiction asks for a state review.

• A court orders an additional tax levy without city approval.

Source: Michigan Local Government Fiscal Responsibility

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