Detroit to get $300 million in federal help

CNN
Friday, September 27, 2013 - 9:32am

NEW YORK (CNNMoney) -- Detroit will get some federal help in dealing with the largest municipal bankruptcy in the nation's history.

Several Obama administration cabinet secretaries were due in town Friday with more than $300 million in federal aid. The money is generally from programs that are available for cities across the nation, not just Detroit.

But the summit between federal, state and city officials will focus on the assistance different agencies of the federal government can provide the city without the need of additional congressional action.

The White House said the money being announced Friday includes nearly $150 million that will go to help pay for demolition of blighted and abandoned properties, a major problem for a city that has lost a large percentage of its population and tax base in recent decades.

The next biggest chunk of money is nearly $140 million in transportation aid, including money to help renovate and rehabilitate city buses, adding security cameras to protect both drivers and passengers. There will also be support for a light-rail system now under construction and support of a new regional transit system.

Finally, there will be about $30 million in public safety assistance, with $25 million coming from the Federal Emergency Management Agency to hire 150 firefighters and buy equipment to help battle the problem of arson in the city, and $3 million in money from the Justice Department to beef up police, including establishing bike patrols.

Even $300 million will only be a drop in the bucket for a city that is in dire financial trouble.

Its July bankruptcy filing detailed $18 billion in liabilities, and the reorganization calls for slashing $11.5 billion in debt down to $2 billion, likely through deep cuts in pension benefits, retiree health care coverage and payments to bondholders.

City services are already in dire straits, with 40% of street lights not working. Medical and fire responders take an average of 15 minutes to respond to a call, more than double the national average.

Neither city nor state officials have asked for a broad federal bailout, similar to the $80 billion rescue of the auto industry that the Obama administration put in place in 2009, when it used federal funds to keep General Motors and Chrysler Group alive during bankruptcy. Some union officials, worried about the precedent of cutting pension benefits in a municipal bankruptcy, have advocated more broad-based federal assistance.

But, with Republicans in Congress and the Obama administration unable to agree on how to avoid a government shutdown on Tuesday or an increase in the nation's debt ceiling next month, the White House made clear after the filing that such broad-based help would not be possible.

"You have heard leaders in Michigan say, and we believe they're correct, that this is an issue that has to be resolved between MIchigan and Detroit and the creditors," said White House press secretary Jay Carney on the day of the city's bankruptcy filing.

Attorney General Eric Holder, Transportation Secretary Anthony Foxx and Shaun Donovan, the secretary of Housing and Urban Development, will be the three cabinet secretaries at the meeting, along with Gene Sperling, the Director of the National Economic Council. Michigan Governor Rick Snyder, Detroit Mayor David Bing and Michigan's two senators and member of the congressional delegation are also scheduled to attend.

Also attending will be Kevyn Orr, Detroit's emergency manager who is overseeing its finances and who was the official who filed the city's bankruptcy in July..

-- CNN's Becky Brittain contributed to this report.

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