<p> Detroit has fallen so far into debt that the only way out is through bankruptcy or mass layoffs, according to a former city auditor who is familiar with the city’s financial structure.</p> <p>Adding to the cash woes, on Monday the state will again withhold about $1 million in revenue sharing because the city is late with its required audit. ‘An $80-million cash flow shortfall sounds terrible,’ said Jan Lazar, a municipal finance and management consultant, ‘but it doesn’t mean the city can’t manage it.’ On July 1, Detroit began its fiscal year with less than $20 million in the bank — not even enough of a surplus to pay the roughly 13,000 employees who cost the city $50 million a month in salaries and benefits. Now, as the budget continues to balloon — Detroit Mayor Dave Bing estimates at least a $300-million accumulated deficit and a $60-million to $80-million immediate cash shortfall — there’s concern that the city will not be able to limp its way through the end of the year. Bing has warned that the city could run out of cash by October and that at least 1,000 workers must be laid off if bankruptcy or an emergency financial manager is to be avoided. Experts say the city must prioritize its bills and pay the most important ones first. Missing a bond payment would be the worst move because it would make borrowing much harder and more expensive, said Jan Lazar, a municipal finance and management consultant with Lansing-based Mercer Group. ‘Missing payroll is the next-to-worst thing,’ said Lazar, who assisted with management of Highland Park when the city was under an emergency financial manager. ‘You can’t lay people off by not paying them today. They are going to file a grievance and they are going to win, and then you’ll end up paying them for not going to work, with interest.’ Detroit borrowed $85 million in tax anticipation notes last month to add some cushion to the city coffers, said Joe Harris, a former city auditor general who served as the city’s chief financial officer in late 2008 and early 2009. That money likely will help the city get through the fall, but must be repaid within a year. ‘I think the mayor is right, and the city is probably in good shape through October,’ said Harris, who helped craft this year’s budget.
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