One day after Gov. Rick Snyder appointed a 6-member team to conduct a financial review of Detroit’s finances, Mayor Dave Bing rolled out a “revenue enhancement” plan estimated to bring the city $50 million in revenue.
But at this point, after years on financial insolvency, many are wondering if the city’s new collection initiative is “too little to late”.
City and State officials have warned that a wrong move at this crucial time in Detroit’s history could land the city in bankruptcy court.
But here’s the twist: Under state law, the city must first be appointed an Emergency Financial Manager (EFM) before being eligible to file for bankruptcy. Snyder’s review team’s findings could result in him appointing an EFM to Detroit, someone who would take away the Bing Administration and the City Council’s power to make financial decisions.
Just a month ago, city and state officials were squabbling over the release of $30 million in escrowed state funds. Now that the city has reached the milestones of an agreement that was contingent on the $30 million drawdown, the city is not in much better shape.
During the drawn out “milestones” tug of war between the mayor’s office and city council members, the mayor’s talking points made it sound like the $30 would stave off layoffs.
Turns out, layoffs are just one of the measures the city has to take in order to move not toward financial solvency but just to keep afloat.
One thing that’s different now is that City residents and business owners face tougher tax collection efforts now that the city has hired private collection agencies to go after delinquent accounts. No one is safe, not even the mighty Illitches who owe more than 1.5 million in taxes.
The city estimates that it could gain nearly $20 million in tax collection initiatives annually if stricter collection is enforced.
That begs the question: why were these collection measures not taken sooner?
The answer is a complex one that boils down to the fact that the city, until recent contracts with private firms, did not have the capacity to go after its debtors, Bing says.
As the city keeps skimming its payroll, there are less people doing work.
“Because of the loss of so many people—we had almost 14, 00 people when we came into office now we 9,700 people—we need some help on the personnel standpoint so we’re going to the outside and getting some outside firms to come in and help us. They are not going to be permanent.”
Meanwhile, the city plans to lay off 500 more workers in early 2013 mostly through attrition and retirement according to CFO Jack Martin.
Still, is this too little too late, Mr. Mayor?
“It’s too soon to say,” Bing said Wednesday. “We’re not throwing in the towel. Contrary to what a lot of people may believe there’s a lot of good things we have done. I think when we lay this plan out it’s going to surprise a lot of people. This is not a ‘get tough’ stance on anybody. It’s fairness and being correct.”
At this point Detroiters can only wait and see. Hopefully, people will get the surprise Bing looks forward to.
Detroit City Council Member James Tate had a question yesterday for the Financial Advisory Board's Chief Jack Martin. The Board met with the Council yesterday to discuss their proposed cuts to city labor contracts.
"PA4 we know is up in the air right now. Potentially it will be voted down if placed on the ballot. What is your contingency plan?" He asked Martin, who is in place under PA4 (the state's emergency manager law) to manage the city's finances in crisis.
"I can’t say specifically what we may do. But no matter what happens with PA4, we’re still running out of cash. We need the hard dollar savings to get through this year. There’s a million-dollar difference in expenses and revenue between 2012 and 2013. My standpoint is we stay on the current path no matter what happens to PA4."
At yesterday's meeting the City Council did not approve the Financial Advisory Board's proposed cuts to city worker's wages and healthcare benefits. But Mayor Dave Bing and the Financial Advisory Board urged the council to act and not stall the labor cuts as the city can no longer operate in the status quo. Under PA4, the Financial Advisory board does not need the council's approval to make these cuts.
"We can talk about this for the next six months, but the bottom line is we’re running out of cash. If we don’t do it in an organized fashion there is going to be chaos and we’ll end up like some of these jurisdictions that filed bankruptcy."
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