By Steve Neavling
DETROIT, April 3 (Reuters) - Detroit's new state-appointed emergency manager on Wednesday disavowed letters sent by the mayor's office saying that the city would stop honoring contracts with its police, fire and paramedics' labor unions.
The apparent miscommunication between Mayor Dave Bing and Kevyn Orr, the former bankruptcy lawyer brought in to clean up Detroit's finances, highlights the challenges Orr may face as he assumes increasing power in the biggest state takeover of an American city in more than two decades.
Written to Michigan's five commissioners of employment relations, the letters declared that as of March 28, the destitute city considered itself in receivership status and no longer bound by its union contracts. March 28 is the date when a Michigan law went into effect giving the emergency manager wide powers including to abrogate union contracts.
Orr's spokesman, Bill Nowling, said the emergency manager had no warning that the letters would be sent.
"That letter was not authorized by the emergency manager and we are looking into it," Nowling said. "Any action of that sort has to be authorized by the emergency manager and this was not."
A spokesman for Mayor Bing, who has said he will try to work with the emergency manager, declined to comment.
According to a copy of the letters, written by Lamont Satchel, the city's director of labor relations, the city was freed from all collective bargaining agreements under state law once it was in receivership.
"The City is no longer obligated to participate in collective bargaining," said the letters, which were given to Reuters by a union official copied on the correspondence.
The letter also declared the city's withdrawal from all mediations and arbitrations and ordered Michigan's bureau of employee relations to dismiss any pending union issues. The bureau mediates and arbitrates labor disputes on which the city and its unions cannot reach agreement.
The city's unionized police, fire, and paramedics are working under contracts imposed on them last summer by Mayor Bing, which cut their pay by 10 percent. Employees also were required to pay 20 percent of their medical costs.
Detroit has agreements with some 48 unions, and outside analysts have said the city needs concessions from organized labor in order to restore financial health. The city is running a $100 million annual budget deficit and a state report said it has some $14 billion in long-term debt.
Orr, a former bankruptcy lawyer who worked on the restructuring of auto company Chrysler, was appointed last month by Michigan's Republican Governor Rick Snyder despite objections from elected city officials.
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