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Detroit hits the wall on budget

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Wednesday, November 17, 2004

Detroit hits the wall on budget

Layoffs loom after mayor, council fail to resolve $80 million snag.

By Natalie Y. Moore / The Detroit News

The city now faces a $80 million budget hole after the Detroit City Council on Tuesday reached a deadlock on moving forward with Mayor Kwame Kilpatrick's plan to borrow money to pay off pension debt.

This year's balanced budget made room for a bond deal but additional council approval was needed to create an ordinance to issue the bonds. The council voted 4-4 nullifying the introduction of an ordinance and setting public hearings on the matter, leaving the specter of potential layoffs and cuts in services to fill the $80 million void.

The council "has not given the administration an alternative," said Sean Werdlow, the city's chief financial officer. "Council is aware of it and not doing anything about it. They are not showing leadership."

The budget, which contained the money earmarked for bonds, was OK'd this spring.

The issue could go to another vote today. Council members Maryann Mahaffey, Barbara-Rose Collins, JoAnn Watson and Sharon McPhail voted against the introduction of ordinance. Sheila Cockrel, Kenneth Cockrel Jr., Kay Everett and Alberta Tinsley-Talabi voted in favor. Alonzo Bates, who usually votes in line with the mayor's wishes, was not present and it is probable that he will reintroduce the vote.

A few council members refused to wait for Bates to arrive for Tuesday's special session.

"It's really unfortunate that there is a bullying mentality on the part of a number of council members that would not even wait for the arrival of a council member who was absent," Councilwoman Sheila Cockrel said. "It's really unfortunate there's an unwillingness to let an issue come formally to the council. This is more of the ramrod-your agenda-mentality that has plagued the term of this council."

Kilpatrick's administration was confident that the issue will be introduced.

"Based on today's vote and previous votes, it appears there is sufficient enough support," said Howard Hughey, spokesman for Kilpatrick.

The pension bond arrangement is a refinancing of the city's $1.2 billion unfunded pension debt for its workers. Werdlow wants to refinance the pension debt with bonds that have an interest rate of 5.8 percent, which he said will save the city millions over decades. The $80 million is owed for this year.

The Detroit Police Officers Association is opposed to the bonds because of risk. Councilwoman McPhail, a likely 2005 mayoral candidate, is leading the fight against the bonds, also citing the risk factor.

Although most council members rejected Kilpatrick's original budget proposal in April, they offered no alternatives to the $80 million pension obligation.

There were 372 layoffs this year and for the fiscal 2005-06 budget year, there could be as many as 1,500 to 2,000 layoffs.

McPhail has previously said that she had ideas for solving a new $80 million budget crisis in lieu of not issuing bonds, but on Tuesday she said the problem is in Kilpatrick's court.

"It's his budget; it's his hole," she said. "Stop spending so much money. Get rid of people by attrition, not layoffs."

The council's fiscal analyst, Irvin Corley Jr., endorsed the bonds this week. Corley said that he had looked at other cities' use of such bonds and found no reason to reject the plan.

Although Werdlow had been before council several times since spring to explain the bond issue, during the pension bond debate some council members said they needed more time. The ordinance proposals were given to the council earlier this month. Kilpatrick called a council special session for Tuesday after the hearing was not set last week.

Councilwoman Mahaffey maintained that more examination into the bonds needs to be done.

"A significant transaction of this magnitude deserves more analysis and scrutiny by experts in the field than has been done at this point. In fact, we have not retained any expert in this field," she said.

You can reach Natalie Y. Moore at (313) 222-2396 or [email protected]

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