Evans: Jail project may wait until deficit is fixed
Detroit — Wayne County Executive Warren Evans said Thursday the county may have to "limp along for four or five years" without completing the troubled unfinished jail project in downtown Detroit while he tries to resolve a $70 million annual deficit.
Evans said the county can't afford to sink any more money into his predecessor Bob Ficano's half-finished 2,000-bed jail at Gratiot and Madison, which was supposed to cost $220 million but could now exceed $300 million.
"If we could find a way to finish this jail and we could afford to do it, I'd certainly entertain it," Evans said in an interview with The Detroit News Editorial Board. "I just don't see it."
Evans said his administration has recently met with officials from billionaire Dan Gilbert's Bedrock Real Estate Services, which offered $50 million to buy the jail site and the Frank Murphy Hall of Justice, two old jails and a juvenile lockup.
The county executive talks to The Detroit News editorial board about a $50 million structural deficit, a pension fund that will require $40 million annually for 10 years, and a half-built jail for which there is no money Max Ortiz, The Detroit News
But the county executive suggested Gilbert's offer is too low and that the Quicken Loans founder wants too much.
"We've got $130 million in the ground," Evans said. "They offered $50 (million) for five buildings, four of which are not for sale."
Tony Saunders, Evans' chief restructuring officer, met with Bedrock officials.
"We just met cordially to make our case clear that we're not going to do anything that we can't afford," Saunders told The News. "So maybe this is an option, maybe it's not, but this is part of the analysis we're undertaking right now."
Gilbert's real estate company remains interested in acquiring some or all of the buildings at the site.
"We're not taking umbrage at anything he said," said Matt Cullen, CEO of Rock Ventures, an affiliate of Quicken Loans Inc. that oversees its real estate portfolio and operations. "We believe that completing the jail at the Gratiot site is too expensive. It's not at all clear it completes the requirements and would be detrimental for downtown for decades to come."
Evans also said he's hiring former Wayne County Circuit Court Chief Judge Rick Kaufman to be his deputy county executive. Kaufman served on Evans' transition team.
Kaufman, who will start the job in two weeks, will be tasked with managing the jail project, Evans said.
Evans presented a dire picture of the Wayne County's finances Thursday, saying Michigan's largest county faces a deficit of nearly $70 million and "financial Armageddon" in the second half of next year unless spending cuts are made. That includes a $50 million recurring structural deficit, plus $20 million in extra pension payments from the general fund, Evans said.
"The financial Armageddon for us is August of 2016, that's when we're not going to have enough pooled money all over the place to pay bills," Evans told The News. "... I don't see a way past August of '16 that we're going to ... financially survive if we don't fix some problems."
Speaking at a Guardian Building news conference earlier in the day, Evans said the county must reduce spending by an amount equal to the projected deficit. "We have to reduce expenditures ... to the tune of about $70 million to be stable," he said.
"One of the big things we have to make a decision about is the pension system," he said. "Everything is on the table. There are no sacred cows at all."
In addition, Evans addressed complaints from the county sheriff and prosecutor's offices that they lack enough money to operate properly, and said he may have to re-prioritize services to fund public safety.
Saunders presented a report Thursday to the board of commissioners on the county's shaky finances, which officials acknowledged last year could lead to state intervention.
"Frankly, I'm not surprised," Commissioner Diane Webb, D-Garden City, said after the presentation. "Given the history of the previous administration, I was very skeptical about the information it was putting forward."
Ficano reported the county's accumulated deficit was about $60 million. The Detroit News reported Wednesday that the new report estimates it is at least $10 million higher than that.
Evans promised the report, which he said was written by his staff with help from Deputy Oakland County Executive Robert Daddow and vetted by global accounting firm Ernst & Young, shortly after being elected to replace Ficano in November.
Webb said the county has some serious concerns about its finances, as Evans' report shows. "But at least we know what the problems really are and where they are," she said.
She also praised Evans' administration for meeting with stakeholders, getting input and contacting the labor unions representing the county's employees about the issue.
"The fact this administration is sitting down at the table with them and saying, 'This is all of our problem and we need to work together to fix it,' is refreshing," she said. "I think the mountain is climbable, it's an obstacle we can overcome if we work together."
Evans declined during his news conference to offer any specific measures to fix the county's budget.
"What we're here today to do is talk about the illness, the depth of the hole, that situation," he said. "Today is not the day for us to talk about solutions."
However, Saunders told the county commission the administration is working on a deficit elimination plan, which it will share with commissioners and Gov. Rick Snyder's office.
He said he can't give a specific timeline for the plan, but initial proposals under it should be sent to county stakeholders in the next two to four weeks.
"We don't want to present a fairy tale plan and hope that it goes over," Saunders said. "What we'll do instead is validate the savings, attempt to get buy-in from our labor unions and make adjustments from there."
Evans, a former county sheriff and Democrat, took office Jan. 1. Ficano, a fellow Democrat who served 12 years, was defeated for a fourth term amid a corruption probe that led to convictions and guilty pleas against four former aides. Three former aides face separate state charges for their roles in the jail project.
The county's financial problems include a hugely underfunded pension system and property tax revenues that have fallen by $100 million since 2008 because of the housing crisis. In December, the Michigan Supreme Court ruled the county owes retirees $32 million for eliminating an annual bonus check meant to offset inflation.
The county's deficit was approaching $175 million last year. It fell dramatically because County Treasurer Ray Wojtowicz agreed to hand over roughly $100 million saved through the delinquent tax revolving fund that loans money to local governments to cover costs before taxes are collected.
That was a one-time cash infusion, however, and did not address structural deficits.
Evans cut salaries of top appointees 5 percent to save $1.2 million. The new executive also has 146 appointees, nine fewer than Ficano.
Detroit News business columnist Daniel Howes contributed.