Thursday, February 3, 2005

Council won't refinance bonds

Pension debt plan would save Detroit $277 million over 14 years; mayor is not quitting.

By Natalie Y. Moore / The Detroit News

Kilpatrick At issue On Wednesday, the Detroit City Council failed to pass a transaction to refinance the city's $1.2 billion pension liability to save $277 million over 14 years. Mayor Kwame Kilpatrick is calling for a special session Friday, asking council members to revote. McPhail Comment on this story Send this story to a friend Get Home Delivery

DETROIT -- Mayor Kwame Kilpatrick said Wednesday that he will call for a special session of the Detroit City Council on Friday, imploring members to reconsider a pension transaction that would avert 2,000 layoffs.

For months, the administration has pushed the council to refinance the $1.2 billion pension debt to save the city $277 million over 14 years. On Wednesday, the measure failed by a 4-4 vote, creating a $160 million hole that must be plugged this year, most likely with layoffs.

"Time has been of the essence. We're playing with jobs," said Kilpatrick, who delayed a trip to Florida to hold an impromptu press conference. "This is not about politics or the mayor's race."

Not including the failed pension deal, Detroit already faces a budget deficit of $94 million from 2003-04 and a projected deficit of $64 million for 2004-05. A few weeks ago, Kilpatrick announced a $231 million budget shortfall for next year and 686 layoffs.

The prospect of deeper cuts, and the possible impact to city services, concerns some residents.

"I don't want to see layoffs. That's No. 1 for me. We haven't had too much service from the beginning," said Lloyd Jones, 68, who complains about slow snow removal.

Councilwomen Barbara-Rose Collins, Sharon McPhail, JoAnn Watson and Maryann Mahaffey -- who attended despite being on sick leave -- voted against the pension obligation certificates. Alonzo Bates, Kenneth Cockrel Jr., Sheila Cockrel and Alberta Tinsley-Talabi voted in favor.

Mayoral candidate McPhail has led the charge against refinancing the pension debt and said "it will not be the fault of this council. Please don't give that blame to the rest of us."

The city pays interest rates of 7.8 percent and 7.9 percent on the $1.2 billion it owes to its pensions systems. By refinancing at 5.9 percent, the city would lower payments and invest some of the proceeds in the stock market.

The council approved a 2004-05 budget last spring that included proceeds from refinancing, but has since waffled.

McPhail said the city should borrow the money.

She, Mahaffey, Collins and Watson wrote a statement saying: "At a time when we face an uncertain future because of a volatile stock market, a federal deficit estimated in the trillions of dollars, and a protracted costly, disastrous war, we should not gamble on a 15-year financing plan that is predicated upon promises of a stable stock market." The four also have been against layoffs.

The general retirement system board, city council fiscal analyst and city auditor general, none of whom is hired by Kilpatrick, all support the deal. Two bond rating agencies told the council that the pension deal was prudent.

In a memo Wednesday, Auditor General Joe Harris said "that the decision should be a 'no-brainer' to any intelligent, objective, informed observer. If City Council fails to approve this request, it should be blamed for its contribution to the city's fiscal crisis."

Council tersely debated for 90 minutes Wednesday. Annoyed at Harris, Collins said "he needs to shut up and go home."

Kilpatrick said, if necessary, he will come to the council table Friday and target Collins and Watson to change their votes. But he said there are a "couple of members who wouldn't vote for this if Jesus walked in."

You can reach Natalie Y. Moore at (313) 222-2396 or nmoore@detnews.com.