(Reuters) – Michigan will immediately begin a preliminary review of the troubled finances of Wayne County, home to Detroit, a state treasury spokesman said on Friday.
Terry Stanton, the spokesman, said county officials were notified of the action in a letter on Thursday from State Treasurer Nick Khouri.
Wayne County Executive Warren Evans on Wednesday asked the state for a fiscal emergency declaration to deal with a chronic budget deficit.
Detroit exited the biggest-ever municipal bankruptcy last year, shedding about $7 billion of its $8 billion of debt and obligations.
Under Michigan law, state officials have 30 days to complete the review of Wayne County that began on Friday. The initial findings will be presented to county officials before a final report goes to Michigan’s Local Emergency Financial Assistance Loan Board, which will determine if an in-depth review is warranted to determine if a financial emergency exists.
In his letter to Khouri, Evans said the county’s general fund budget deficit was projected to jump to $171.4 million in fiscal 2019 from $9.9 million this year due to declining tax revenue and escalating personnel costs. In addition, the county’s finances are sagging under an $870 million unfunded pension liability, and its credit ratings have fallen into the junk level.
The county’s request for a review led to the postponement until next week of the sale of nearly $187 million of general obligation notes that had been slated for pricing through Bank of America Merrill Lynch on Thursday.
The offering document for the notes was amended on Thursday to inform potential investors that the county was seeking a consent agreement with the state “which would allow the county to continue negotiations with stake holders while also providing the county with the ability, if necessary, to make the difficult decisions needed to move the county out of financial instability.”
(Reporting by Karen Pierog; Editing by Lisa Von Ahn)