CITY SERVICES: Robert Burton and Samantha Gangley board a bus on Michigan Avenue. The mayor's proposed cuts would force Gangley to find a new way to work.Detroit Budget Crisis
Mayor: Fix Detroit or risk takeover
Mayor Kwame Kilpatrick detailed his plans to several city unions Monday, then presented them Wednesday in meetings with newspapers and in a televised address. He said job cuts will not include police officers, firefighters or medical crews.Audio excerpt
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Mayor Kilpatrick on the 'painful steps' Detroiters must take
As part of the mayor's immediate plan to save $77 million, he is proposing to:
Lay off 686 employees effective March 4. Another 237 vacant positions will go unfilled.
Seek a 10 percent wage reduction from union employees in the form of Days Without Pay, which means workers would be paid for 36 hours per week, instead of 40. Unlike agreements with former Mayor Coleman Young, no overtime would be paid until employees work over 40 hours.
End 24-hour bus service.
Cut his $176,000 salary and that of all mayoral appointees by 10 percent.
Cut the salaries of nonunion employees by 10 percent.
Ask City Council members to reduce their budgets.
Ask companies that do business with the city for a 5 percent to 10 percent concession. About a quarter of the city's budget, or $375 million, goes to professional or contractual services.
As part of the mayor's long-term restructuring strategy, he is proposing to:
Reduce employee benefits, examine early buyouts for employees with 25 or 30 years of service, review workers' compensation and implement a defined contribution plan.
Look at department consolidation.
Conduct a study on public lighting, transportation and health to see if the city should be involved in those services.
Seek state-approval of a property tax reduction for the city's 23 stable neighborhoods by redefining Neighborhood Enterprise Zones.
Seek state approval for a prepared food tax, a cigarette tax, a liquor tax, and increase the utility user tax.
Eliminate all general city vehicles, including vehicles for mayoral appointees, effective July 1.
The state can step in and take over a troubled city or school district that is incapable of overcoming financial troubles on its own. The takeover process must be prompted by one or more of a dozen triggering events outlined in state law -- such as failure to pay creditors, payless paydays for municipal workers or failing to make required payments to pension funds. The city can ask for help or the state treasurer can decide action is necessary. The governor then appoints a team that reviews finances and decides whether there is an emergency and whether the local government has developed a workable plan or the governor must appoint a financial manager. A governor-appointed financial manager has the power to do almost anything necessary, including service cuts, layoffs and canceling union contracts.
The issue: With a projected $230 million budget deficit for the fiscal year beginning July 1, Mayor Kwame Kilpatrick predicts the city could face a state takeover of its finances without immediate cuts, a move that could leave Detroiters without a voice in city financial matters.
Immediate cuts: Kilpatrick has ordered 686 layoffs and will eliminate 237 vacant positions. Kilpatrick, his appointees and nonunion city workers will take a 10 percent pay cut, and the city will seek concessions of up to 10 percent from unions and city contractors, among other short-term steps to cut costs.
Longer-term measures: Kilpatrick proposed renegotiating benefits with city workers, selling off city cars and studying whether the city should continue to operate its bus, public lighting and health systems. He also wants an increase in the city's utility tax and wants to create new taxes for liquor, cigarettes and prepared foods.
The pitch: Facing a tricky political climate in an election year, Kilpatrick suggests his measures are critical to avoid a takeover. But many pieces require approval from labor unions, City Council members and state legislators, some of whom reacted skeptically to his plans.
Detroit's finances
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DETROIT -- Detroit could face a state takeover of its finances within a year if officials don't move quickly to cut costs in the face of a projected $230 million deficit, Mayor Kwame Kilpatrick said Wednesday as he laid out a blueprint for layoffs, pay cuts and a scattering of tax increases.
"If we don't make a definitive change now, there will be a receiver in here a year from now," Kilpatrick said. A state receiver would have broad power to fire workers, void labor contracts or cut services without input from the city.
Outlining a two-part plan for repairing the city's crumbling finances, Kilpatrick said the city must slash costs in coming months, then look for deeper long-term changes -- including evaluating whether to shed some city agencies altogether. But he still faces political battles with labor unions, City Council members and state lawmakers who must approve many of his plans, a tussle complicated because he is seeking re-election this year.
Kilpatrick said he will lay off 686 city employees and get rid of 237 positions that are currently empty. He said he will order a 10 percent pay cut for the city's nonunion workers, including his appointees, and curtail some bus services. And he will seek concessions of up to 10 percent from city unions and contractors.
All told, that would save the city about $77 million.
And that's just to keep the city afloat in the next few months.
"These are things that have to happen immediately and making the tough decisions to get it done now," Kilpatrick said. "But this is not the big structural change that we need for the City of Detroit."
Ultimately, repairing city finances crippled by decades of population loss will require modest tax increases on utilities, cigarettes, liquor and fast food, Kilpatrick said. He said the city should renegotiate how it provides health care and pensions for its workers, and will sell off city cars and will study whether it can afford to continue operating its bus, health and public lighting systems, all of which are losing money.
He can make some of those cuts on his own -- his administration planned to start sending out layoff notices today. But union leaders and state lawmakers said other pieces could face opposition.
"We believe there is some truth in what they're saying, and there is some emergency. Does that translate into pay cuts? We're not certain," said Al Garrett, president of Council 25 of the American Federation of State, County and Municipal Employees, which represents 5,000 city workers. He said the union is willing to work with Kilpatrick, but suspects some union leaders will try to block proposed cuts.
Convincing Detroiter Samantha Gangley will be every bit as difficult. Part of Kilpatrick's plan calls for shutting down the city's bus service from midnight to 4 a.m. -- about the time she climbs on board the first of two buses that take her from her house on the city's east side to her job at a Metro Airport restaurant. She has to be at work by 4:30 a.m., and the ride takes at least an hour.
"I think it's ridiculous," Gangley said Wednesday afternoon as she waited on the sidewalk to switch buses on her way home from work. "It's already really hard. It already takes too long. If they cut back on bus service, it'll be really hard."
She said if the service cuts go through, she'll need to find someone to drive her downtown every morning, where she can catch a SMART bus to work. Kilpatrick spokesman Howard Hughey said the city will analyze ridership and hold public hearings before any service cuts take effect.
Meanwhile, key state lawmakers said they were reluctant to sign off on tax increases for the city. "We have to get everyone, at all levels of government, out of the mindset that the first solution they take is to ask the taxpayers for more money," said Ari Adler, spokesman for Senate Majority Leader Ken Sikkema, R-Wyoming.
And some City Council members said they were upset Kilpatrick had broached his plan to the city's labor unions and the media before telling them. "I'm extremely disappointed there was no conversation with council. We need to put all our heads together. I would hope the mayor and the administration realize we need to be together on this," Councilwoman Alberta Tinsley-Talabi said.
Officials said they will lay out their plans in detail for the council Friday.
Kilpatrick detailed his plans to several city unions Monday, then presented them Wednesday in meetings with newspapers and in a televised address. In a meeting with The News, he said the best leverage he has for getting unions to go along with a pay cut in the form of unpaid days off is the threat that without substantial and swift cuts across-the-board, Detroit will face financial receivership -- in effect losing control of its finances to the state.
He said job cuts will not include police officers, firefighters or medical crews and -- aside from reducing hours of bus service -- thinks Detroit can cut costs without cutting services for residents. "I do not believe we can turn back the clock on vital city services. The vast improvements we've made must continue," he said in his evening address.
He also acknowledged that this round of cuts and tax increases -- even if it is successful -- won't end the pressure from a shrinking population and rising benefit costs that have been undermining the city's finances. He said he wants to cut the city's property taxes and restructure its enterprise zones, which provide tax breaks, to make the city more financially attractive to its residents and staunch population losses.
Experts said unless Detroit can stabilize those trends, it will face additional financial problems in the future.
"In the short run, you have to cut costs, but in the long run, you have to stabilize revenue," said Van Conway, president of Conway, MacKenzie & Dunleavy, a consulting firm in Birmingham. "If you keep losing people, you're eventually going to get to the point where the plane hits the trees."
"In the short run, you have to cut costs, but in the long run, you have to stabilize revenue. If you keep losing people, you're eventually going to get to the point where the plane hits the trees."
Detroit News Staff Writer Gary Heinlein contributed to this report. You can reach Brad Heath at (313) 222-2563 or bheath@detnews.com.
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