Detroit mayor imposes new contracts, wage cuts

July 18, 2012 - 6:36 PM

DETROIT (AP) — Detroit's mayor slashed wages and reduced benefits for city workers Wednesday without any collective bargaining, one of the most severe steps taken so far as officials grapple with a crisis that has pushed the city to the brink of financial ruin.

Dave Bing imposed the new contracts on workers one day after the City Council narrowly rejected them. He was able to bypass the council by relying on terms of a new state law that gives him extraordinary powers to help improve the Motor City's economic health.

The drastic cutbacks and eliminations are expected to save the cash-strapped city more than $100 million annually, Bing said.

"This is a tough day for me, a tough day for city workers and a tough day for all of Detroit," Bing said in a statement. "However, it is a necessary day. These savings are a key component of my administration's plan to stabilize the city's financial condition."

Union officials blasted the move and suggested the possibility of legal action.

"You knew they were going to try something," American Federation of State, County & Municipal Employees Council 25 spokesman Ed McNeil said of the new contract terms. "We have to go back and fight some more."

With Detroit's budget deficit topping $200 million, a financial review team determined in late March that the city was in "severe financial stress."

City officials signed an agreement with the state aimed at avoiding an outside overseer known as an emergency manager to more directly control Detroit's finances. But his move Wednesday was similar to actions emergency managers elsewhere in the state have taken, including one appointed to oversee the city's school system.

Property and business taxes have been on the decline in Detroit for a number of years, but spending has not. The city has spent about $150 million more per year over the past several years than money it has taken in, according to Bing. Bonds were used to help make up the difference.

"The city can no longer borrow, hoping to cover this deficit spending," Bing said. "Without action the city will shut down."

Besides the wage cut, the new terms require workers to pay 20 percent of their medical costs, reduces holidays and eliminates bonus vacation days and annual increases to retirement plans.

Joseph Duncan, president of the Detroit Police Officers Association, said city workers were "devastated."

"Now, the morale issue is what the city has to deal with," he said.