INTERVIEW-Detroit manager needs bankruptcy expertise: Governor

DETROIT, Feb 21 (Reuters) - Michigan Governor Rick Snyder said that if he decides to name an emergency financial manager for Detroit, that person must have experience in difficult financial situations such as restructuring and bankruptcy.

In an interview with Reuters on Thursday, Snyder said political experience could be an asset, but also a negative in a controversial job created to turn around the struggling city.

Asked what qualifications he was looking for in an emergency financial manager, Snyder said: "People with a lot of experience in restructuring and bankruptcies and difficult financial situations."

Experts appointed by Snyder to scour Detroit's books reported earlier this week that the city faces a financial emergency and needs help to recover. They described a chaotic administration of the city and what they called "operational dysfunction." For example, city officials and the police department gave differing figures for police staffing.

Snyder has 30 days from the date of the report to make a decision, and the governor said he will take at least a week to consult with Detroit officials and others before acting.

The manager would take over a city in prolonged decline, a much diminished place from the one that gave birth to the U.S. automotive industry and Motown music.

Detroit has seen the steepest population decline of any major U.S. city in recent times, shrinking from 1.8 million people at its peak in the 1950s to just over 700,000 people today. The exodus of residents and jobs as the auto industry contracted left the city with a fraction of its tax base while its costs remained.

The three choices the Republican governor faces are: to conclude there is no emergency; to negotiate a second, so-called "consent agreement" spelling out the actions the state believes Detroit must take; or calling in an emergency manager, Snyder said.

He ruled out the first option, saying the city clearly was in a financial crisis. The report from the team of experts said that Detroit had not fulfilled the first consent agreement with the state and a second such plan would be futile.

TOUGH JOB TO FILL

Snyder would not say whether he will name an outside manager to run the city's financial affairs.

He acknowledged that the job could be tough to fill. An emergency manager could face resistance from the mayor and city council and could be challenged in court at every turn.

"There are a lot of people who would not want this job and made it pretty clear," Snyder said. "This would be a career challenge of a lifetime."

Snyder did not directly answer a question whether he would prefer to name an African-American manager of the city, which is 83 percent black.

"To have someone that's well accepted in Detroit, and respected, is important," he said.

He would not rule out a bankruptcy filing by the city. Restructuring experts have said that Chapter 9 bankruptcy would not be a good solution because it is complicated, uncertain and costly. U.S. cities that have teetered on the edge of bankruptcy, such as New York in 1975 and Philadelphia in 1991, have recovered with help from states instead of declaring bankruptcy.

If Detroit declared Chapter 9 bankruptcy, it would be the biggest municipal filing in U.S. history.

"The solution shouldn't be overly restricted, in particular when you're sitting down with a whole bunch of creditors. It doesn't make a whole lot of sense to say you wouldn't have that (bankruptcy) at least in your toolkit," Snyder said.

During an earlier press conference, Snyder showed slides setting out Detroit's dire fiscal shape including some $14 billion in long-term liabilities and years of borrowing to meet operational expenses.

He downplayed expectations of a major state bailout for the city.

"We do that to some degree, but it's fairly limited...When you're looking at $14 billion in long term-liabilities, that's not something that's in our financial set," Snyder said.

Detroit Mayor Dave Bing, who stands to lose much of his power if an emergency manager is appointed, said on Wednesday that a plan to fix Detroit does exist. But Bing said he has been hindered by the city's restrictive charter, labor agreements, court challenges, lack of money, and other factors.

"We need to grow the city of Detroit. That's the long-term answer here and it's going to be really hard," Snyder said.

(Additional reporting by Karen Pierog; Editing by Greg McCune and Mary Milliken)