28 November 2012

Michigan Funds Delayed by Detroit City Counsel

story first appeared on mydesert.com

The Detroit City Council delayed a vote Tuesday on one of two key contracts the state said the city had to approve to avoid going broke by year's end, throwing into question whether the state will release funds Detroit needs to meet payroll and pay other bills in a matter of weeks.

The council also unanimously rejected a four-year, $48-million no-bid contract that Mayor Dave Bing's administration sought for a major overhaul of the city's Department of Water and Sewerage that would have terminated 81% of its workers over five years and outsourced hundreds of jobs.

But it was the delay of the contract for the Miller Canfield law firm that ignited a war of words between Bing's administration and council members, who traded blame for a last-minute decision that put the city's cash flow at risk.

Now the city will not receive the first $10 million that had been set for release Tuesday, according to Bing, who hired the firm to advise him on the city's financial stability agreement with the state.

An angry council President Charles Pugh accused Bing of being disingenuous and forced to accept a deal holding $10 million hostage over the hiring of one company.

It wasn't clear what immediate effect, if any, the delayed vote would have on the city's ability to pay bills, but the stakes were colossal, with the Bing administration warning that Detroit risks a cash shortage of $3 million-$5 million by mid-December.

Caleb Buhs, a spokesman for state Treasurer Andy Dillon, said the actions Detroit must take for the state to release $30 million in bond proceeds held in escrow -- $10 million this week and $20 million in December -- were made clear in an agreement on reform benchmarks that the state and Bing's administration released last week.

Buhs said if the milestones are not completed, the funds will not be released from escrow.

Krystal Crittendon, the city's top lawyer, told the council she could not recommend approving a contract with the Miller Canfield law firm because of concerns such as whether there is a conflict of interest.

Specifically, Crittendon said the $300,000 contract for Miller Canfield could pose a conflict because, she and several council members said, the same firm had a role in the so-called milestone agreement laying out reform benchmarks the city must meet in order to be able to get bond-sale proceeds. The firm also had a hand in crafting Public Act 4, the emergency manager law that voters repealed two weeks ago, and in drafting the financial stability agreement.

The council voted 8-1 to table the contract, with council President Pro Tem Gary Brown the sole vote against the delay.

The city's program management director, William (Kriss) Andrews, who spoke in favor of the contract, left immediately after the vote.

Andrews also said it was he, in negotiation with Dillon's office, who crafted the milestone agreement, and Miller Canfield's only role in it was strictly to write its terms into a legal format, not dictate its content.

The milestone agreement is a series of goals the Snyder administration wants the city to meet in the coming months in exchange for millions from the bonds sale. The governor's office wanted the city to approve a nearly $2-million contract extension for the financial firm Ernst & Young, which the council approved, as well as the Miller Canfield contract. The council also approved a $32-million, five-year contract with Automated Data Processing to help modernize the city's antiquated and costly payroll operations.

The council, meanwhile, had little debate when it rejected the water department's proposed contract with EMA of Minneapolis.

It wasn't clear what would happen next. Water department spokeswoman Mary Alfonso said she had no immediate comment on what steps the department's board would take in the wake of the vote. Bing's office also had no comment.

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