Snyder: At least week from deciding Detroit's fate

DETROIT (AP) -- Michigan Gov. Rick Snyder said Thursday that he's at least a week away from deciding if Detroit needs an emergency manager to confront its $327 million budget deficit and $14 billion long-term debt.

Snyder told reporters that he considers the city's drastic population loss over 60 years to be the main reason for its financial woes.

Detroit had 1.8 million people in the 1950 U.S. census and about 700,000 in 2010. Snyder said new growth holds the key to Detroit's recovery.

"This is an issue that's structurally been there for decades," Snyder said.

The Republican governor spoke two days after a state-appointed review team determined that Detroit is in a financial emergency.

Snyder has less than a month to decide whether the state will take over the city's finances. Snyder said last week that he's compiling a short list of candidates for the emergency manager's job.

Massive borrowing is the only reason Detroit's short-term financial picture isn't even worse, Snyder said.

Without borrowing $600 million, Detroit's accumulated budget deficit through June 30, 2012, would have been $937 million, he said.

"You look at this situation, and it's quite dire," the governor said. "We need to grow the city of Detroit. That's the answer here, and it's going to be really hard."

The city's options are limited, with experts split on what may be best: long-term, methodical restructuring with help from the state or cutting the city's losses now through municipal bankruptcy.

Mayor Dave Bing opposes a state takeover and has said that without an influx of money from the state, any emergency manager would face the same frustrations he's endured. Bing also opposes taking the bankruptcy route, but he says his restructuring plan approved last year by the state has been hindered by legal and other roadblocks.

Detroit would be the largest city to file for Chapter 9 bankruptcy if that path is taken, according to James Spiotto, a municipal bankruptcy expert at the Chicago-based Chapman and Cutler law firm.

About 640 Chapter 9 bankruptcies have been filed since Congress enacted a revised Municipal Bankruptcy Act in 1937.

A deal between Bing and Snyder about a year ago promised some state resources and expertise if the city met certain milestones and deadlines. The City Council gave its OK to the agreement but was slow in approving some outside professional contracts tied to it.

The state, in turn, initially held millions of dollars in bond money in an escrow account that Detroit needed to meet payroll and pay some other bills.