Detroit council OKs budget cuts to cope with COVID-19-induced deficit

Detroit — The City Council adopted budget changes Tuesday to stave off a $194 million shortfall in the upcoming fiscal year because of revenue losses due to COVID-19.

The nine-member panel unanimously supported the budget revisions during a virtual formal session just weeks after the dramatic changes were proposed by the Duggan administration. 

The move comes as part of a series of adjustments proposed last month by Detroit Mayor Mike Duggan to cope with an overall deficit of $348 million anticipated over the next 16 months stemming from the pandemic.

Detroit Mayor Mike Duggan addresses the city council and presents his 2020-21 budget on Friday March 6, 2020.

Duggan said Tuesday the aggressive cuts ensure a state-appointed emergency manager isn’t put in charge of the city’s finances again. Impacted programs, he said, include summer recreation for kids and the city's demolition program. The city’s 2021 budget will be about $1.1 billion.

“It won't be easy. There are some hard decisions," Duggan said during a Tuesday media briefing. "If this pandemic continues longer than the end of this year, we're going to have to make more cuts. If things ease earlier, we may be able to restore some things. But right now we think we have a very conservative approach.”

The mayor previously laid out cuts in the existing fiscal year, ending June 30, to deal with a $154 million shortfall. Those reductions, primarily addressed by workforce changes and with the use of city fund balances, will be voted on closer to the end of this fiscal year, officials said. 

Council President Brenda Jones, in a statement posted to her Facebook page following the vote, said the pandemic and subsequent budget challenges weren't something that the city could have anticipated.

"But this is our current reality as we continue to fulfill our Charter-mandated duty of approving the budget," Jones wrote. "... I know we and the residents of the City of Detroit have the resiliency to overcome the impacts of the COVID-19 pandemic on our city’s financial and human resources."

The council, in a closing resolution approved Tuesday, noted the “virtual freeze in revenues" and "tremendous outflow of resources required to maintain our community through this crisis, have — in two short months — rendered the (prior) proposed budget unworkable.”

About 80% of the funding hole is being covered with $151 million in surplus and rainy day funding and $147 million pulled from other sources, including capital improvement funds, blight remediation funds, federal transit funds and cost savings, the Duggan administration has said. 

The revenue losses also affected much of the city's 8,000-member full-time workforce, resulting in pay and work hour reductions to help close the full budget gap. The city also moved to lay off 200 part-time, temporary and seasonal workers. 

Councilwoman Janeé Ayers, chaifwoman of the budget committee, said the revisions were “rough.”

“There are no qualms about that. But the bottom line was to make sure that the citizens of Detroit still didn't miss out,” Ayers said.

“You still deserve to have your trash picked up, you still deserve to make sure that the vacant lot that may be next you get mowed. We need to make sure that we have our public safety and first responders fully staffed and working and healthy to be there. And I think that we were able to accomplish that in this budget process.”

She lamented the recreation cuts: “It's sad to think that we won't have those opportunities this summer. But we want to be alive later on in the summer into the fall.”

The budget cuts are also hitting the council members’ budgets, many of whom have taken cuts and shifted staff to work share, Ayers said.

City employees have retained health care and have been eligible for both unemployment as well as an extra $600 per week in federal stimulus money. 

The city, six years removed from municipal bankruptcy, has suffered major losses in some of its top funding sources: gaming and income tax revenues and revenue sharing dollars during the outbreak. The closure of Detroit casinos alone, Duggan has said, is costing the city about $600,000 in revenue per day. 

It's also spent millions of dollars on measures to help combat the spread of the virus. 

Detroit has been among the hardest-hit communities in the country. As of Monday, the city had 9,385 confirmed cases and a death toll of 1,088. 

The mayor noted Monday that he and council members were unified in their plans to address the funding challenges, warning the city doesn't want to risk state oversight coming back into play.

A Financial Review Commission installed as part of Detroit's landmark bankruptcy released the city from strict oversight two years ago after it achieved consecutive balanced budgets and other conditions established under the plan.

Detroit's Chief Financial Officer Dave Massaron told The News Tuesday that the unanimous agreement on the budget plan is "continued evidence" that city leaders are "going to budget conservatively and maintain our self determination and keep the Financial Review Commission out."

Massaron added that Gov. Gretchen Whitmer's extension of the emergency in Michigan through May 28 doesn't affect the city's shortfall projections. The city, he said, worked with the state on its estimates and under the assumption that an economic restart would be gradual throughout the rest of the calendar year. 

In December, Moody's Investor Services deemed Detroit among the weakest of the country's 25 largest cities in its preparedness to weather a financial downturn, citing worries over pension contributions, fixed costs, volatile revenues and capital needs.

Before the pandemic hit, the mayor detailed a $1.1 billion general fund spending plan in what he called his "tightest budget" since taking office as part of a proposed $2.4 billion budget for 2020-21, which begins July 1.

The mayor last month began doling out hazard pay to Detroit's front-facing workers and public safety staff during the public health crisis. The policy pays the employees the equivalent of an extra $800 per day for COVID-19.

The council, in its closing resolution, urged Duggan's administration to consider boosting multiple allocations once it is economically feasible.

Among them, the council wants to ensure senior home repair grants and Detroit’s affordable housing development and preservation fund remain adequately funded.

The council also wants more money directed toward educating landlords and homeowners on avoiding or resolving rental compliance and blight compliance as well as another $500,000 in operational funding for the Charles H. Wright Museum of African American History. 

The mayor's office, council further urged, should develop a plan that would carve out about $40 million in the upcoming years for demolition efforts and invest $150,000 to launch an ad hoc group to propose solutions for property tax overassessments in Detroiters between 2010-2016. 

Duggan said Tuesday he's concerned about the blight in the city's neighborhoods "but itcame down to a choice between that and laying off police and firefighters, and we felt like keeping our services intact was priority one, and we need to come back with a solution to finish the job on blight."