Tuesday, November 22, 2011

City Finances in America

November 16, 2011

Mayor Urges Detroit to Accept Drastic Action to Fix Finances

DETROIT — In an address broadcast live on television stations across this city, Mayor Dave Bing told Detroit on Wednesday evening that its finances were in dismal shape and that without major concessions from unions, the privatizing of some city services and layoffs, Detroit would run out of money by early next year.
“Simply put, our city is in a financial crisis and city government is broken,” Mr. Bing said, adding later: “The reality we’re facing is simple. If we continue down the same path, we will lose the ability to control our own destiny.”
He asked for big pay cuts from city workers, a rise in the corporate tax rate and a lowering of payouts from the pension system.
Mr. Bing’s remarks were rare for a mayor, even in long-troubled Detroit, both because of the depth of the problem he outlined and because of the audience he chose to share it with: not just other top officials, financial consultants or union leaders, but an entire city.
In an address at times as sober as a spreadsheet and as pleading as a sermon, Mr. Bing appeared to be hoping to sway public opinion in favor of the deep, painful cuts he proposed.
“Tonight I am asking every Detroiter and all who care about this city to stand with us and work with us to keep Detroit our city,” he said. “I want you to know the challenges we are facing. I want you to know what we’re doing to address them. I want you to know that I love this city just like you do, and we need your help like we’ve never needed it before.”
At another point, Mr. Bing said: “The apathy that has paralyzed Detroit for decades ends tonight.”
One challenge that he faces is convincing people here that this really is an emergency, the financial end of the line. Some Detroiters are inured to urgent warnings, having heard plenty of gloomy news about the city’s finances, its miserable population losses (down by 25 percent last decade to about 713,000 residents), and its sometimes dubious political leadership. Mr. Bing, a former professional basketball star and a businessman, arrived at City Hall in 2009 in the firestorm that followed Mayor Kwame M. Kilpatrick, who pleaded guilty to obstruction of justice and still faces federal criminal charges.
Mr. Bing proposed hiring private companies to manage Detroit’s streetlight operation, which has been widely criticized for leaving portions of the city dark and dangerous, and the bus system, which has been plagued by delays, a shortage of equipment and repair problems.
He also called for sweeping cuts for city employees, proposals that immediately drew criticism from union leaders here but that he said could save the city $40 million by June, the end of the city’s budget year. Otherwise, he said, the city would run out of cash by April and face a $45 million shortfall by June. Mr. Bing suggested an end to furlough days but a 10 percent pay cut for workers, including police officers and firefighters; a 10 percent increase in employee contributions to health care coverage; a lowering of payouts from the pension system; and “additional strategic layoffs.”
“This is not an attack on labor or our dedicated employees,” Mr. Bing insisted. “The private sector, including the auto industry, was forced to accept tough cuts to survive. The terms we are asking for are no different than what most Detroiters receive at their places of employment.”
While some City Council members praised Mr. Bing for the new plan, a question loomed among Detroiters and analysts: Realistically, could all of this get done? Not to mention swiftly? In addition to seeking concessions from unions during their current contract, Mr. Bing said, he is seeking an increase in the city’s corporate tax rate, 10 percent pay cuts for city contractors and millions of dollars that he said the State of Michigan owed the city in lost revenue sharing from a 1998 agreement.
Minutes after Mr. Bing’s address, Gov. Rick Snyder issued a statement saying he was working closely with the mayor and remained supportive of the city’s efforts to solve its problems. Still, the governor also said he anticipated that Mr. Bing would soon submit a request for a preliminary financial review of the city — which can be an early step when the state is asked to assign an outside party to manage a city’s finances, though it is not an automatic sign that an emergency manager is imminent.
Around here in recent weeks, many, including Mr. Bing, have spoken of the possibility of a state-appointed emergency manager’s assuming control of city operations. On Wednesday, Mr. Bing said he wanted to make it entirely clear that such an outcome was the last thing he would wish.
“I don’t want an emergency manager making decisions for my city,” he said. “I am your mayor, and I want to continue to lead the city back. I am going tell you what we are doing to get buses up and running. I am going to tell you what we’re doing to turn the lights on and keep our city safe. And I’m going to ask for your help to push for the reforms, tough choices and structural changes we need to control our own destiny.”

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