DETROIT -- A review team appointed by the state of Michigan has concluded that Detroit is mired in a serious financial problem, a step that draws the city ever closer to emergency oversight by a state-assigned financial manager.
If Gov. Rick Snyder concurs with the findings in the coming days, state officials will appoint an emergency financial manager who would attempt to solve the city's financial woes, or could ultimately urge Detroit to enter into bankruptcy proceedings.
In a way, the review team's conclusion, announced on Tuesday, seemed inevitable in a city that has wrestled with more than $14 billion in long-term liabilities, nearly annual projections of imminent cash shortfalls and a population -- and accompanying tax base -- that has plunged to 713,000 residents from 1.8 million decades ago. Still, it is an outcome many of this city's political leaders have fought for years to avoid, racing in recent months to cut costs and collect more revenue as proof that Detroit can solve its own problems.
The team's findings called new, undesired attention to the dismal financial circumstances of government operations in Detroit, a city which, by some other measures, has experienced a period of renaissance and private investment in recent years. It also raised the prospect of growing political and racial tension between the city, where the population is about 83 percent black and many leaders are Democrats, and the state, where the population is nearly 80 percent white and where Republicans, including Mr. Snyder, control the capital.
Along the streets here on a blustery, frigid day, Detroiters expressed a mix of views about the prospect of state intervention. Some suggested that the notion violated the role of the city's elected leaders, while others seemed unconcerned about who fixes the city's problems as long as someone does.
On Tuesday, it remained conceivable that Detroit might yet avoid a state-appointed emergency financial manager, though many here suggested that the odds of that now appeared slim and Mr. Snyder has in recent days been studying a pool of possible candidates for the job.
Under a Michigan lawaimed at sparing the state's most financially troubled cities from failure, Mr. Snyder could within 30 days reject the conclusion that Detroit's situation is dire. Or, should he agree with that conclusion, Detroit officials could still appeal the decision. The city could also enter into a legal agreement with the state, laying out plans for remaking the city's finances with no emergency manager. However, just such an agreement was enacted last April, and some state officials say it has failed to go far enough to solve the city's crisis.
"We believe there's a financial emergency in the city, and there's no plan in place to correct the situation," said Andy Dillon, Michigan's state treasurer and a member of a six-person review team that examined Detroit's finances over the past two months.
The review team found a city troubled for years with cash shortfalls -- including one expected to reach $100 million by June -- as well as repeated general fund deficits, year after year, dealt with mostly by issuing long-term debt. In fiscal year 2012, that general fund deficit reached more than $326 million.
But the city's long-term liabilities -- more than $14 billion -- may be the larger problem, the review team's report suggested.
Detroit's problems are by no means simple or new, and some have questioned whether even an emergency manager -- someone meant to have few political considerations and an unsentimental perspective on the city's operations -- will be able to turn things around.
In only the last four years, the number of city employees has been reduced to 9,696 from more than 13,400 to save money, and some argue that the only way to financial stability will be through more cuts, furloughs and benefit reductions. Yet at the same time, residents here complain about slow city services and a significant increase in killings in 2012.
The city's geography is itself another puzzle. The cradle of the American auto industry and once the nation's fourth most populous city, Detroit remains vast at 139 square miles -- a city suited to a larger population and city services to match -- but is now left with pockets of empty lots, shuttered homes and a continuing foreclosure problem in the face of high unemployment.
If an emergency financial manager is ultimately appointed here, that person will have relatively broad powers to reshape Detroit's budget, but will be unable, at least temporarily, to throw out existing labor contracts, as had been permitted under a sweeping emergency manager law that voters statewide rejected last November. Since then, the governor and legislators have passed new provisions for emergency managers, which take effect in late March and grant such managers more control over labor contracts.
Under Michigan law, an outside manager could eventually help lead the city into bankruptcy proceedings -- an outcome that few in Detroit or Lansing see as wise or likely but that some have come to talk about as a real consideration. Municipalities rarely wind up pursuing such a course, known as Chapter 9, and if Detroit were to do so, it would be the nation's largest municipal bankruptcy in terms of size of debt as well as the most populous city to do so.
Around the nation, states have long used a variety of approaches, including appointed receivers and oversight boards, to step in when cities are teetering toward failure. The role and authority of such bodies range widely, as do views about whether they ultimately work. A financial control board helped New York City regain its footing in the 1970s. In Michigan, five cities and three school districts are already under the supervision of an emergency financial manager, but the prospect of outside oversight for Detroit, given its size and history, draws especially pointed reactions.
Mayor Dave Bing, a Democrat who has spent much of his four years in office focused on trying to solve Detroit's financial woes and has yet to announce whether he will seek re-election this year, has in the past said the city needs no takeover by an emergency manager. Still, even during discussions of cost-cutting in recent months, Mr. Bing and Detroit's City Council have sometimes clashed over what to do. And earlier administrations -- including that of Kwame Kilpatrick, a former mayor accused of corruption whose fate was being weighed here by a federal jury on Tuesday -- have left behind a financial crisis, Mr. Bing has said.
On Tuesday, Mr. Bing said even he was unsurprised by the review team's conclusion. "My administration has been saying for the past four years that the city is under financial stress," he said, 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."
This article originally appeared in The New York Times.