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With Detroit's 'financial emergency' now official, what's next?

Most Detroit residents and Detroit-watchers are resigned to the fact that it's likely a matter of when, not if, Governor Snyder will appoint an emergency manager for the city.

Nobody was surprised when a state financial review team found Detroit is in a “local government financial emergency” and that the city’s current leadership “lacks a plan” to deal with it.

Detroiters themselves remain divided on whether an emergency manager is the best way to go. There are those like Tom Wilson who says the city faces bankruptcy otherwise, and might as well accept the inevitable.

“You cannot do this on your own, and if the state wants to come in and help, let them come in and do what they gotta do,” Wilson said. “Let’s go ahead and get this thing done, get hurt, then go through the healing process.”

But Wilson acknowledged state intervention doesn’t guarantee a quick or effective resolution. He points to the Detroit Public Schools as an example where years of state control hasn’t resolved serious financial problems.

That experience and many others have left many Detroiters deeply leery about state intervention in the city.

Detroit’s elected leaders are still absorbing the contents of the report. With a new, stronger emergency manager law taking effect in late March, their futures remain uncertain.

Detroit mayor Dave Bing responded with a statement, saying he was “not surprised” by the team’s findings, adding: “If the Governor decides to appoint an Emergency Financial Manager, he or she, like my Administration, is going to need resources, particularly in the form of cash and additional staff.”

Bing also lashed out Wednesday at the report’s contention that the city has no plan to deal with its financial crisis.

“We have the plan, but we face significant challenges executing it in a timely manner,” Bing asserted. “We are hindered by several factors, including the City Charter, labor agreements, litigation, governmental structure, and a scarcity of financial and human resources.

City Council member James Tate struck a similar note, saying that any real fix for Detroit’s deep-rooted financial problems will take resources, and time.

Tate said the city’s estimated $14 billion dollars in long-term liabilities means a quick fix isn’t likely.

“I don’t see how the state is going to come in and wipe that out in a short period of time,” he said. “Because these are long-term debt obligations that have been acquired over a number of years.”

State Treasurer Andy Dillon said that if an emergency manager is appointed, the state’s goal is to get that person in and out quickly, before restoring power to local officials.

Michigan State University economist and municipal finance expert Eric Scorsone said that by contracting with outside restructuring firms at the state's insistence, the city is already laying the groundwork for intervention, and beyond that, a possible “managed” bankruptcy.

Scorsone said “it’s an enormous amount of work to even prepare for such an event” in a city of Detroit’s size and financial condition.

“It’s going to take cash, it’s going to take resources," Scorsone said. “Even bankruptcy is not going to fix all of Detroit’s problems.”

Sarah Cwiek joined Michigan Public in October 2009. As our Detroit reporter, she is helping us expand our coverage of the economy, politics, and culture in and around the city of Detroit.