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Detroit council approves cost cuts to stave off state takeover

(Reuters) - The Detroit City Council on Wednesday continued its offensive against a possible state takeover of the city by passing a cost-cutting measure sought by Mayor Dave Bing for his reform agenda.

A majority of the nine-member council has been approving contracts and measures in recent weeks to fill Detroit's near-empty coffers and aid efforts to restructure city operations. Meanwhile, a review team appointed by Michigan Governor Rick Snyder could recommend at any time that the city should have an emergency financial manager, who, if appointed, could recommend that the city file for bankruptcy.

A Chapter 9 municipal bankruptcy filing by Detroit would be the largest ever in the United States.

"We're in a crisis and if we do nothing to save $90 million, the state's going to come in and do it and it's going to be a lot worse with respect to our employees," said Council President Pro Tem Gary Brown at a public hearing on Wednesday ahead of the vote.

The city of 700,000 has been hit by a steep decline in population, years of severe budget deficits and escalating employee costs.

PENSION FREEZE, PAY CUTS

The council approved a pension freeze that suspends accrued benefits for nonunion employees for a year. Another measure sought by Bing - which would force up to 20 percent in pay cuts on nonunion workers in the city's executive and legislative branches through unpaid furlough days - was amended by the council to 10 percent. A vote on the amended ordinance will be held later this month, according to a council official.

On Tuesday, a majority of the council agreed with a Bing plan to increase nonunion employees' share of healthcare costs to 30 percent from 20 percent.

City council members said similar cost-cutting measures for unionized workers would be negotiated with the labor unions.

The mayor on Wednesday announced an amnesty program for delinquent income tax payments owed by individuals and businesses in 2011 and prior years. The program, which begins January 22 and ends February 16 and is expected to raise $4 million, is also targeting nonresidents who travel to Detroit to work, including professional athletes and entertainers.

"The city will not be writing off delinquent balances," Bing said in a statement. "After the amnesty period, we will take more aggressive collection actions including providing delinquent reports to credit agencies."

The program is part of a plan by Bing to generate an additional $50 million for the city this year by collecting unpaid fees, fines and taxes and selling unused property and abandoned vehicles.

Last week the city council approved some contracts required by Michigan officials and Bing's request to remove Krystal Crittendon from her position as the city's corporation counsel.

(Reporting by Karen Pierog in Chicago; editing by Tiziana Barghini and Matthew Lewis)

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