Detroit Mayor David Bing says City Won’t Run Out of Money by April

David BingDetroit is no longer at risk of running out
of cash by April because cost-cutting and other measures are taking
effect, Mayor Dave Bing said Thursday, but the city council president
and others do not share Bing’s optimism.


Bing presented a
financial and operational restructuring plan update to the council
Thursday afternoon. It highlights cost savings from 1,000 imminent
layoffs, overdue payments from the Detroit Public Schools district and a
corporate tax increase he says will mitigate a cash shortfall.

The
18-month plan calls for $102 million in savings through June and $258
million over the 2013 fiscal year. Auditors had previously warned
Detroit could run out of money as early as April.

Bing
said members of a state review team won’t uncover any financial issues
in the city that his administration doesn’t know about when they meet
with his staff in the coming weeks.

A
preliminary review last month determined there was “probable financial
stress” in city government and that Detroit faces a general fund deficit
of about $200 million. The review team is looking into Detroit’s
finances – a step in a process that could lead to Michigan taking over
the city’s government.

“Do we have financial stress? Damn right we do. We’ve had it since day one,” Bing said.

The
review team’s recommendations will be forwarded to Gov. Rick Snyder.
City officials have said they want to avoid the need for a
state-appointed emergency manager.

City
Council President Pro-Tem Gary Brown said he was not as hopeful about
the plan as Bing. In the past, including the previous two years under
Bing, city budget officials have repeatedly overestimated the revenue
coming in to the city treasury, Brown told Bing and mayoral aides.

“It (revenue) just didn’t show up as projected,” Brown said. “And we don’t have a system in place in city government to react.”

In
particular, Brown said he has reservations about projected savings from
reduced overtime, work rule changes and a reorganization of the
municipal bus system’s management.

City labor
union leaders have been collaborating with the council and Bing to
convince the state that an emergency manager is not necessary. Changes
to union contracts and the pension system still are needed to eliminate
the city’s long-term structural financial problems.

Bing
and union leadership are negotiating medical benefits concessions that
can save the city $15 million through June and changes to pensions that
would bring about $25 million in savings in the 2013 fiscal year. Bing
has said he’ll cut 1,000 jobs early this year to save about $14 million.

“A
large percentage of the city’s budget is tied up in labor contracts in
terms of hourly wages, health care and retirement issues,” said Mike
Boudreau, director of Bloomfield Hills-based O’Keefe and Associates
financial turnaround consultants.

“There’s no
way around that, but I think it’s unfair to put it totally on (the
unions). I think the pain needs to be spread around.”

While Bing’s plan focuses on the next 18 months, Detroit’s structural issues also need to be addressed, Boudreau added.

“I
think he’s headed in the right direction, but I think it’s missing the
mark,” Boudreau said. “They’ve come forward with plans before that
didn’t materialize.”

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