Duggan's budget plan calls for more funding for public safety, retirees
Detroit — Mayor Mike Duggan on Friday presented "the tightest budget" he has faced since taking office, with a focus on pumping more dollars into raising police officer pay, expanding animal control and making one-time infusions to boost the city's rainy day fund and a retiree pension trust.
Duggan stressed as he detailed his $1.1 billion general fund spending plan as part of a proposed $2.4 billion budget for 2020-21 that the city regained local control of its finances two years ago when it emerged from the strict oversight of the Financial Review Commission put in place as a condition of its bankruptcy.
It cannot pass a budget "on a hope and a prayer," he said, since that oversight board "has not gone away."
"If we run a deficit in any quarter that Financial Review Commission pops back up for a minimum of three years and the state again has control," Duggan said. "If we run a deficit, the state of Michigan is back in charge and we've lost our self-determination."
To better position itself for increased pension contributions in 2024 and the prospect of a future recession, the mayor is proposing to shift $50 million from last year's surplus to build up its rainy day fund by $30 million, and put $20 million into the city's Retiree Protection Fund to offset disappointing investment returns from last year.
Duggan told reporters the city's two pension funds "have been doing fine," but a year ago, "the performance was not as good as it needed to be."
The proposal, to drop $20 million into the fund in addition to the $50 million per year that the city had already committed to, is to ensure the pension system remains financially sound.
"We are going to stay on top of the issue so our employees never again have to have their pensions threatened," he said.
The administration's plan to boost its rainy day fund comes after a December report from Moody's Investor Services that deemed Detroit among the weakest of the country's 25 largest cities in its preparedness to weather a financial downturn. The change, he said, will bring the city closer to the national standard.
The funding is coming from the city's $123 million surplus from the previous year, officials noted.
Although it's currently billed as a one-time allocation, Detroit's Chief Financial Officer David Massaron said it's possible the city might have to divert more dollars to the protection fund in future years.
"Right now, given where investment ratings are and the coronavirus's impact on the market, it's very likely we may have to do more next year," he said. "At the end of the day, every year we look at pension returns and we make a calculation on what we have to do."
Massaron said the city is budgeting responsibly, and he doesn't fear Detroit is at risk of the review commission stepping back in. But it must stay on track, he said.
Duggan's plan proposes an increase of $7 million for the city's police department to hire new officers and raise their starting pay by $2,000 to $42,000, as well as the launch of a new cadet program, saying "we need to be hiring 400 officers a year."
The council abruptly ended the meeting shortly after it began public comment, as emotions ran high during public comment as activists raised their worries over the city's controversial water shutoffs and a Detroit News Investigation that revealed residents were overassessed by about $600 million over a six-year period from 2010-16.
"Cut the damn check," Detroit water activist DeMeeko Williams yelled in reference to the compensation being demanded by some who were overtaxed. "I want respect in this damn building."
Council President Brenda Jones on Friday suggested that the budget earmark dollars to hire a special project coordinator to pull together an ad hoc group to explore options and provide recommendations to address overassessments.
The budget plan also allocates $50 million for blight, most of which will go toward its new city-run demolition office. The city has taken over demolition as the remaining portion of more than $265 million in federal blight dollars, a program overseen by the city's land bank and building authority, winds down.
The mayor on Friday reiterated to the council that the city will "have to deal with the blight removal issue sometime in the near future."
In November, the council rejected a $250 million bond plan Duggan proposed to erase the remaining blight from the city. The measure was defeated by a 6-3 vote after multiple weeks of debate and a public hearing that drew a crowd of about 500 residents, clergy and some lawmakers, many of which objected to the proposal. Others urged support, warning of the dangers of slowing the pace of removal of the city's blighted homes.
Since spring 2014, about 21,000 houses have come down in Detroit, mainly with federal dollars. The funding is expected to run out by the end of April. It will then have to be city-funded. The mayor said he's open to new suggestions but so far there haven't been any proposed, he said.
"One way or another, we're going to have to find a way to fund blight reduction in the city," he said. "Most council is open to finding a solution. I don't know if it will be in the budget or after the budget, but I was just reminding council of the urgency."
Despite a projected revenue growth of just 1% — or about $12 million — based on flat property tax revenue and an anticipated decline in state revenue sharing, the mayor noted Friday that city departments have identified cost savings with cuts to overtime and their use of contractors. The city also has eliminated 154 vacant positions from the budget to yield another $7.4 million more in savings. Projected staff turnover will equate to another $6.6 million, officials said.
Councilwoman Janee Ayers took issue Friday with Duggan's plan to allocate funding toward a 90-day cadet program that began in January to help would-be candidates evaluate whether a job on the city's police force is the right fit. The pay is $15 an hour.
"I am completely against the whole paying police officers to figure out whether they want to be police officers," she told Duggan. "We have to figure out a solution to the problem, but I don't think that's it."
Ayers also raised worry over the impact of nationwide outbreak of coronavirus and the role it will play in tourism and travel and the potential impact on the city's hospitality industry.
"As our budget relies on a large portion from the casino revenue funds and tourism, what are we doing to prepare ourselves for that," she said. "I do believe that unless we figure out something as a nation, we're going to take a significant hit when it comes to this."
The mayor said the city's health office is communicating with state and federal officials daily and, thus far, no cases have been confirmed in Michigan.
"You are right, if we end up with a widespread number, we could have empty casinos, which has an immediate effect on revenue," he said. "You could have empty hotels, you could have an impact on the auto show."
City council will hold departmental budget hearings through the rest of the month and into early April. It's expected to vote on the general fund budget on April 7.