Detroit to borrow for capital investments in public safety, recreation
Detroit — For the first time in nearly a decade, the city is preparing to go to the bond markets with the intention of borrowing for capital investment in public safety, parks and recreation.
The Detroit City Council on Tuesday voted 6-3 in favor of Mayor Mike Duggan's request to authorize $255 million in tax-exempt municipal bonds over the next five years. Council President Pro Tem Mary Sheffield and members James Tate and Raquel Castaneda-Lopez voted no.
The council's approval enables the city to return to the bond market on its own credit after gaining improved marks among rating agencies and Detroit's emergence this spring from strict financial oversight put in place during Detroit's historic bankruptcy.
Of the $255 million, officials said about $110 million would be issued in 2018, and the remaining funds in 2021. The funding is tied to ballot issues for public safety, recreation, museums and parks authorized by voters in 2004 and 2009.
"It's been a long time since we've borrowed on our own credit. The funding for this was voter-approved going back more than a decade," Chief Financial Officer John Hill said. "Before 2010, the city went to market routinely to get money for its capital projects. That’s what I hope this is starting again."
Hill said the projects were outlined in the city's capital agenda "wish list" approved two years ago by the council; Detroit hopes to borrow for the first projects by the end of this calendar year.
Among the recreation-related projects are technology upgrades and library reading rooms at city recreation centers, a roof replacement at the Charles H. Wright Museum of African American History, golf course upgrades as well as projects at five city recreation centers — Adams-Butzel, Heilmann, Patton, Williams and the Northwest Activities Center.
The list also covers investment in the Aretha Louise Franklin Amphitheatre and Park, Detroit's Spirit Plaza and water line replacement and improvements on Belle Isle.
On the public safety side, the bonds will fund public safety vehicles, fire facility improvements, new animal control trucks, bulletproof vest replacements and unmanned aerial vehicles, among other things.
Coming out of bankruptcy, the city has been concerned about interest rate costs on the bonds, Hill said.
Detroit believes it will have rates around 5.5 to 6 percent, which is not investment grade "but is a good rate for the city," Hill said. Officials, he added, believe "there's a lot of interest in Detroit coming back into the market" and "it could drive the price of the bonds down."
Sheffield on Wednesday said she supports the bonds but wanted something in writing from Hill's office stating the CFO would present council members with a budget amendment for the 2018-19 fiscal year.
"They didn't do that. I have some issues with that," she said, saying the CFO's office will be amending the current budget, which already had been approved.
"I really didn't want to vote against it but it's important to me that we do not violate the budgetary procedures in place," she added. "It's appropriate for any changes for an approved budget to come before council for an amendment. We did not get that yesterday. It's about transparency and open government."
Sheffield also noted that a portion of Tuesday's approval was tied to a $13 million allocation for demolition. The council, she said, should have had input and some of those funds could have been used toward preventing foreclosures.
Castaneda-Lopez and Tate remarked during Tuesday's meeting that council had not had an adequate opportunity to thoroughly vet portions of the resolution. Tate stressed the importance of having more time to do so, "especially when talking about taxpayer dollars."
The approval, Hill said, allows the administration to amend the 2018-19 budget, but he noted that no contracts will be let without council's approval.
"Everything has to come back to the council for approval before we can spend the funds," he said.