DETROIT

Dave Bing Gives Update On Detroit Finances To City Council

01/05/2012 02:05 pm ET | Updated Jan 06, 2012

Detroit Mayor Dave Bing gave an updated restructuring plan and discussed the city's finances with City Council Thursday afternoon. He announced 1,000 layoff notices have already gone out to city workers and the DDOT bus system has been moved under a new management company, among other immediate efforts to save the city money.

The meeting came after the mayor and council had worked through their holiday break to figure out the city's short-term cash flow problem and ward off a possible state takeover.

Bing announced in November that Detroit was facing a $45 million deficit and would run out of cash by April. Michigan Gov. Rick Snyder soon moved for a preliminary review of the city's finances, the first step toward appointing an emergency manager who would have special powers to break contracts and sell public utilities in the name of making the city solvent.

After the preliminary review found "probable financial stress" a 10-member formal review team is set to begin a deeper probe into Detroit's finances next week.

Bing and City Council have said they oppose a state takeover and have been working to come up with their own plans to prove the possibility of financial stability for Detroit.

Bing, flanked by members of his executive team, Kurt Lewis and Chris Brown, laid out various revenue raising measures, as well as specifics of the city's debt obligations.

Brown explained how Detroit managed to owe $13.2 billion dollars -- or $18,500 per resident -- through a combination of debt and pension and healthcare obligations for city employees and retirees. He also showed how accounting tricks could revise the city's actual third-party debt down to $1.8 billion.

"It's not debt, it's a longterm liability," he said, adding the city should subtract its post-employment costs (healthcare and pension obligations), water and sewer debt, unlimited tax general obligation and non-general fund pensions from that number.

According to his calculations, the city ends up with $1.8 billion dollars of true third-party debt, which it pays $145 million per year to service.

Bing emphasized the city's need to focus on short-term revenue generating solutions rather than tackle the longterm, structural financial problems immediately.

"Legacy problems have been with us for 30 years and suddenly everyone's coming out of the woodwork telling us what we should do," he said. "I'm not ready to answer that just yet. I'm looking at next 18 months to get us some headroom on a cash-flow standpoint that then will allow us to go back and look at structural things."

Bing named a handful of actual revenue-raising measures, including a 1 percent increase in the corporate business tax, bringing it up to 2 percent, beginning Feb. 1.

The city also has already recouped $10 million in past due bills owed by Detroit Public Schools and expects to receive $5 million more before the end of this month.

And Bing's plan factors in $10 million in savings from restructuring DDOT.

But the majority of his cost-saving measures are still contingent on winning deep concessions from the city's unions. Bing and his aides were not willing to speak very openly about negotiations, since both parties are still at the table.

The city has already sent out pink slips to 1,000 workers, effective in February. Bing said the layoffs would mean $14 million in savings for the city.

But City Council President Charles Pugh and Member Ken Cockrel expressed skepticism that 1,000 layoffs would be sufficient. They pressed Bing on his plan's dependence on winning concessions from city unions on healthcare and wages.

Bing admitted that if he could not get the concessions he's seeking, more layoffs would be necessary.

For a full recap of the meeting, see our liveblog below.

01/05/2012 3:27 PM EST

Residents' Taxes Will Stay The Same

Council Member Brenda Jones pressed Bing on whether the state would begin collecting income tax on behalf of the city. Bing previously requested tax collection assistance from the state.

He said the city would continue talking with the state, "but I think they're waiting until we give them a plan before they will commit anything."

Jones also asked if Bing had considered reverting to the city's old resident income tax of 3 percent. The city agreed to lower the rate to 2.5 percent in exchange for revenue sharing from the state, with the state has since failed to provide.

Bing agreed that the state hat reneged on the deal but said, "One of the things we're not prepared to do right now is increase taxes."

01/05/2012 3:13 PM EST

Financial Review Team Will See The Plan

Council Member Saunteel Jenkins asked whether the newly appointed financial review team for Detroit would have access to the mayor's updated plan.

Gov. Snyder appointed a 10-member review team after a preliminary review of Detroit's finances found "probably financial stress." The team has 60 days to decide whether to recommend the governor appoint an emergency manager for the city.

Kurt Lewis confirmed the review team, which hasn't met yet, would receive a copy of the plan during their orientation.

Bing posed a rhetorical question to some laughter: "Do we think the city is under financial stress?"

"I'm not anti the review team coming in because we're open to anybody that can help us get out of this process," he said. "But if their job is to figure out whether or not we're under financial stress, well."

01/05/2012 3:02 PM EST

JoAnn Watson: Go Get Our Money From The State

Council Member JoAnn Watson pointed to the $220 million the state of Michigan owes Detroit under a past revenue-sharing agreement.

"It has come to my attention that the state has found $1 billion," she said, referring to the state's surplus that Gov. Rick Snyder is expected to announce Jan. 18.

"The same state that wants to talk about longterm debt does not want to talk about longterm accounts receivable," Watson said. "That is our money. We should not pussyfoot around it."

01/05/2012 2:56 PM EST

1,000 Pink Slips Have Already Gone Out

Chris Brown confirmed that 1,000 layoff notices have already gone out to city unions. "We're planning to have people out the door off the payroll by February," he said.

01/05/2012 2:51 PM EST

Gary Brown Doesn't Believe DDOT Savings

Council President Pro Tem Gary Brown raised an eyebrow and Bing's assertion that the city could save $10 million by changing the DDOT bus system's management structure.

Bing announced a new management company took over DDOT Wednesday.

"I just don't see how we'll get $10 million in the next five months out of DDOT," Brown said. "It would take 12 to 18 months to push down a cultural change in DDOT to see a real cost savings. It's not going to happen over the next five months just because you take one management team out and put a new one in."

01/05/2012 2:45 PM EST

Layoffs Still Imminent

Bing is sticking to 1,000 layoffs, a possibility he first suggested in November.

Some members of City Council had called for up to 2,300 layoffs of city employees.

Bing says the laid off workers would be off the payroll by the end of the month, leaving $14 million in savings for the city.

City Council President Charles Pugh and Member Ken Cockrel expressed skepticism that 1,000 layoffs would be sufficient. They pressed Bing on his plan's dependence on winning concessions from city unions on healthcare and wages.

Bing admitted that if he could not get the concessions he's seeking, more layoffs would be necessary.

01/05/2012 2:42 PM EST

Bing Lists Possible Revenue Sources

Bing named a handful of actual revenue-raising measures, including a 1 percent increase in the corporate business tax, bringing it up to 2 percent. Bing said that would take place Feb. 1.

The city also has already recouped $10 million in past due bills owed by Detroit Public Schools and expects to receive $5 million more before the end of this month.

And Bing's plan factors in $10 million in savings from restructuring in DDOT.

01/05/2012 2:36 PM EST

City's Cash Flow Problem Has Not Changed

Bing aide Kirk Lewis says the cash flow situation in Detroit has not changed since Bing in November announced an expected shortfall.

"There is no change from the prior report. It's still in June a $45-million deficit."

01/05/2012 2:35 PM EST

5 Point Plan For Short Term

Bing laid out 5 key areas to focus on in the coming months.

1. Public safety. Bing again rejected cuts to city police and fire, saying that was something Detroit citizens did not want.

2. Public lighting. Getting streetlights up and running will also be a focus.

3. DDOT. "We absolutely must fix our bus system," Bing said.

4. Detroit Public Schools. Bing said he's been being with DPS Emergency Manager Roy Roberts to talk about shared services and bring cost savings to the city and the district.

5. Detroit Works. "What we're going to start to do is start looking at the density of our neighborhoods," Bing said. "You'll see a lot of movement and improvements as it relates to moving people around to get density in our neighborhoods."

01/05/2012 2:30 PM EST

Bing: We Need To Focus On Short Term

Bing lamented the recent focus on Detroit's legacy debt, saying the focus now should be on keeping the city's cash flowing.

"Legacy problems have been with us for 30 years and suddenly everyone's coming out of the woodwork telling us what we should do," he said.

"I'm not ready to answer that just yet. I'm looking at next 18 months to get us some headroom on a cash-flow standpoint that then will allow us to go back and look at structural things."

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