Howes: Wayne Co. books fiscal win, eyes jail solution
Wayne County’s books, a perennial mess under the hapless Bob Ficano, are balanced, according to its Comprehensive Annual Financial Report filed with the state Treasury.
But Michigan’s most populous county is a “way away from getting this thing done,” County Executive Warren Evans said in an interview Monday. “Wayne County will not be fixed for several years, and then it won’t stay fixed unless there is a thought about the long-term fiscal responsibility that is necessary to stabilize it.”
Where did this guy come from? This Wayne County veteran, a former sheriff who did stints with the prosecutor and county executive over a long career, is bringing a healthy dose of financial reality to an office for that for too long acted as if simple rules of accounting don’t apply south of Eight Mile.
Major challenges loom, as Evans is expected to tell Detroit City Council in a briefing Tuesday. The county pension system is just 45 percent funded; revenue, chiefly in the form of property taxes, only now is beginning to recover; and the unfinished jail project on the edge of Greektown remains an eyesore whose future is yet to be determined.
“There’s a lot of upside potential, but there’s no upside potential for county services if we just start spending it because we have it, as opposed to understanding we still have tremendous unfunded liabilities in the pensions,” he said, “so I need surpluses for that going forward.
“The jail project is going to take money that we don’t have, so the idea that we’ve gotten past bankruptcy and now we have a CAFR with a surplus doesn’t mean we’re out of the water. It just means we’re doing the right things up to this point.”
The county closed the fiscal year ending Sept. 30 with a net-cash surplus of $5.7 million, a sum that would not have been achieved without concessions in collective bargaining, reductions in health care expenses for retirees and active employees, reductions in future pension benefits and transfers from the county’s Delinquent Tax Revolving Fund.
“The county has been insolvent from a cash perspective since 2007,” says Tony Saunders, the county CFO and Cass Tech grad who served as emergency manager in Benton Harbor. “And when I say ‘insolvent,’ I mean not one penny in the bank account.
“The DTRF deal bought us some time. Right now, we’re right at budget; we’re hitting our targets” and are on track to book a $23 million accumulated surplus by the end of the current fiscal year. That’s meaningful progress in a county that looked primed for an emergency manager.
Two things happened. First, Detroit botched its consent decree with the state Treasury by early 2013, ensuring the appointment of Kevyn Orr as emergency manager and a Chapter 9 filing four months later. The spectacle illustrated the power of bankruptcy to unilaterally disempower elected officials and union leaders, to reshape collective bargaining contracts and terms with creditors.
Second, county commission members, county union leaders and county employees concluded by their actions, not their rhetoric, that the risk of slow-walking the county’s own consent decree with Treasury threatened a repeat of Detroit’s experience. In that, Evans reaped the political benefit of lucky timing.
The result is a county that has defied the skeptics. It didn’t repeat the mistakes of Detroit under former Mayor Dave Bing, or Detroit union leaders who wasted months of the Chapter 9 case trying to collectively bargain deals bankruptcy could unilaterally impose.
Evans’ business-like approach, coupled with a financial team focused on real-world numbers instead of politics, is creating allies in Lansing and the Detroit business community — allies he’ll need in the coming Battle of the Jail.
“The best argument I’ve heard is, if we remove the jail and now we have a tax-paying entity there, in 40 years we will have made up the loss we take on the sale of it at this point in time,” Evans said. “I don’t have 40 years to get Wayne County to where it needs to be.”
True, politically speaking. But the choice between continuing development of the jail site on the edge of a quickly transforming downtown and consolidating it with local courts on Mound Road is not a zero-sum exercise. The county has options, and so do would-be buyers of the jail site (can you say Dan Gilbert) if all sides can agree on the numbers.
So far, they can’t, chiefly because Evans and his team have been focused, rightly, on the financial restructuring to avoid emergency management and to shore up the county’s credit ratings. With a cash surplus in hand, and this year’s building, charting a way forward for the jail is critical.
The first step: determining the gap between how much the county has committed to the project and how much it could reap from a sale to a private investor like Gilbert’s Bedrock Real Estate unit — a gap estimated to be at least $100 million.
Among the options: the county could sell the iconic Guardian Building to private investors, move county offices to Cadillac Place, the former General Motors Corp. headquarters on West Grand Boulevard, and use the proceeds to lessen taxpayer losses on the jail boondoggle.
Timing is on Evans’ side. A comparatively strong macro-economy, growing enthusiasm over downtown revitalization and the prospect of more with the Ilitch Family’s District Detroit development signal a hunger for deal-making that could help Wayne County off-load the albatross weighing on its books.
If the past 15 months are any indication, Evans and his financial team will use goodwill and business savvy to find a way to make it work.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays. Follow him on Twitter @DanielHowes_TDN, or catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.