New York ( CNN ) -- The Detroit City Council passed a financial consent agreement Wednesday evening with a 5-4 vote , which grants the city the power to void contracts and slash costs but not provide state funding or loans to bail the city out of its financial problems . City and state officials avoided a Thursday deadline to save the city from the threat of looming financial insolvency or a takeover of city government by Michigan . The consent agreement was backed by Mayor Dave Bing and Michigan Gov . Rick Snyder . The deputy mayor of Detroit , Kirk Lewis , signed off on the consent agreement on behalf of Bing , who is recuperating from a hospital stay . Snyder issued a statement shortly after the vote and commended the council for acting `` responsibly , '' but said there is still work to be done . `` The magnitude of the city 's financial challenges means that many difficult decisions lie ahead , '' the governor said . `` We must build on this spirit of cooperation and be willing to act in the city 's long-term interests . '' The review team voted to accept the agreement before the city council met . Fierce opposition from unions -- in a city that remains a bastion of labor power -- threatened to stymie efforts to pass the rescue package . If the city council did not agree on the deal , Snyder could have , by law , appointed an `` emergency manager '' who would have assumed the powers of the mayor and council to run day-to-day operations . The city council was under pressure from the public and city unions to reject the deal with the state . At the same time , it would lose its powers if Snyder went ahead and named an emergency manager . The only action it has taken this week to deal with the crisis was to double the city 's corporate income tax to 2 % . Years of decline in population and businesses and a shrinking of the tax base have pushed Detroit into a deep financial hole despite a recent resurgence in the U.S. auto industry . Without more cost cutting , the city wo n't be able to pay its bills come June . An estimate in January , the most recent available , was that the city would be down to $ 20.9 million in the bank by the end of this week . An emergency manager would have had the authority to void contracts with unions and vendors . He or she could also sell off various city assets , from the water department to valuable art in the city 's museum . As the debates , negotiations and lawsuits raged this week , they did so without Bing , who was recently released from the hospital after serious intestinal surgery and wo n't return to work for two weeks . Both Bing and Snyder said they want to avoid a state takeover , which in itself could be the first step toward the largest municipal bankruptcy in the nation 's history . While Detroit continues to struggle financially , the U.S. automakers based in or near the city have enjoyed a financial resurgence . General Motors reported a record profit in 2011 . And a pick up in auto sales and hiring has led to a nearly two-point drop in Michigan 's unemployment rate over the last 12 months , the biggest improvement of any state . CNN 's Jordana Ossad contributed to this report .
City faces insolvency ; vote prevents Michigan state takeover . The Detroit Free Press reports that the city is facing a $900 million deficit and has been unable to pay its bills for months. come June . City of Detroit struggling , but its automakers enjoying financial resurgence .