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Detroit braces for millions in funding losses tied to 'second wave' of COVID-19

Christine Ferretti
The Detroit News

Detroit — The city is bracing for millions more in financial losses from the latest state-mandated shutdowns prompted by the COVID-19 crisis and is examining ways to curb costs. 

Detroit's Chief Financial Officer Dave Massaron told Detroit's council Tuesday that the city stands to lose $10 million from a recently imposed three-week "pause" of operations for Detroit's three casinos, and that hole could grow to $50 million if the closures stretch on to spring. 

Massaron stressed Tuesday that city departments have to "recommit" to restructuring efforts to spare dollars as well as additional workforce savings changes which so far have included work-share arrangements and furloughs. 

"Every member of council, every department head, every independent department head, should understand we have an additional revenue shortfall and extremely tight environment and we should be looking at all of our own staffs and expenditures — contract or otherwise — to drive savings," he said.  "The budget was incredibly tight and it has gotten tighter."

The city's financial projections come after Gov. Gretchen Whitmer this month announced new restrictions limiting gatherings at high schools, colleges and restaurants to combat what she described as the "worst moment" yet in the pandemic. 

The new policies temporarily halt in-person instruction at high schools and colleges, indoor dine-in service at restaurants and bars, and high school athletics as well as close some businesses, including movie theaters, bowling alleys and casinos.

Michigan’s coronavirus numbers have been doubling every two weeks. The state added a record of 50,892 new cases last week for a total of 314,216 cases and 8,543 deaths since the virus was first detected in Michigan in March.

"We are preparing and working as hard as we can to maintain (financial) reserves so we can respond to the revenue shortfalls," Massaron added. "We need to balance essential city services with the need for savings."

Detroit Mayor Mike Duggan laid out aggressive cuts in the spring to stave off a shortfall of $348 million over the span of March 2020 to June 2021 early on in the crisis. 

In September, Detroit's financial team projected that the city instead expected to lose an estimated $410 million

That loss factored in another $62 million acknowledged during the city's fall revenue conference that officials said were prompted by a deepening economic downturn, which included the loss of more than 50,000 jobs and the scaled-back restart of Detroit's three casinos, a major blow to the city's wagering and income tax collections.

The city dealt with its funding hole with $151 million in surplus and rainy day funds and $147 million pulled from other sources, including capital improvement funds, blight remediation funds, federal transit funds and cost savings. 

Most of the city's 8,000-member full-time workforce has endured reductions in their hours and pay. Massaron said the city hoped to achieve $50 million of savings over a 15-month period with workforce changes. 

Councilwoman Janee Ayers asked Massaron on Tuesday how dire the financial picture is and what city staffers should expect.

"I just need you to tell me what I need to do," she said. "We have people that depend on us ..." 

Detroit's Deputy CFO Tanya Stoudemire said "everything is on the table" and staff does have to be prepared for a potential return to a work-share environment. 

"Right now, we don't have anything else to fall back on," said Stoudemire, noting the city is "without a cushion" but that "coming back to our employees is always the last resort."

"We're looking at everything, not just looking at workforce savings," she added.

Council President Brenda Jones said she doesn't want the city to slip back into the red.

"If nothing else, I am definitely trying to avoid having a deficit," she said.

Council member Raquel Castaneda-Lopez said her office previously achieved cost savings requested by the administration, asking whether the CFO will provide specifics on the reductions needed, noting it "creates some unneeded fear and anxiousness without having the exact number."

Specific figures haven't been determined, Massaron and Stoudemire said. 

Massaron said the city remains hopeful that a second federal stimulus bill will eventually come through to help communities and families offset the financial impacts of the pandemic.

As of Monday, Massaron said he's personally reviewing any requisition over $200,000 to ensure grant funds are fully utilized or whether certain purchases can be delayed.

"We're doing everything we can to try to put financial controls in place to limit the amount of pain," he said. "... we should minimize the pain that our employees will feel as a result of this revenue shortfall."

cferretti@detroitnews.com